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 March 31, 2010





OR





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





From the transition period from ___________ 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 [    ]   No [X ].





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 May 10, 2010,there were 9,437,480 shares of Common Stock of the issuer outstanding.





TABLE OF CONTENTS








PART I FINANCIAL STATEMENTS





Item 1.
Financial Statements
3Notes to Financial Statements
6Item 2
Management's Discussion and Analysis or Plan of Operation
17Item 4
Controls and Procedures
32





PART II OTHER INFORMATION





Item 1.
Legal Proceedings
33Item 2.
Changes in Securities
33Item 3.
Default upon Senior Securities
33Item 4.
Submission of Matters to a Vote of Security Holders
33Item 5.
Other Information
33Item 6.
Exhibits and Reports on Form 8-K
33


















2







DYNARESOURCE, INC.


(An Exploration Stage Company)


Consolidated Balance Sheets


March 31, 2010 and December 31, 2009





March 31,

2010

(Unaudited)


Dec 31,

2009

(Audited)ASSETSCurrent Assets:Cash and Cash Equivalents

$
1,400,554


$
1,640,508Foreign Tax Receivable


123,088



120,210Accounts Receivable – Related Party


50,760



50,760Other Current Assets


242,752



217,136Total Current Assets


1,817,154



2,028,614Fixed Assets:Mining Camp Equipment and Fixtures (Net of Accumulated Depreciation of $548,371 and $524,424)


353,550



350,828Mining Properties (Net of Accumulated Amortization of $403,934 and $390,953)


4,299,433



4,312,414Total Fixed Assets


4,652,983



4,663,242Other assets:Note Receivable from Affiliate


750,000



500,000Deposits


6,691



6,666Total Other Assets


756,691



506,666TOTAL ASSETS

$
7,226,828


$
7,198,522LIABILITIES AND EQUITYCurrent Liabilities:Accounts Payable

$
27,304


$
40,586Accrued Expenses


33,437



43,317Total Liabilities


60,741



83,903Preferred stock, $1.00 par value, 10,000 shares

authorized, 1,000 and 1,000 shares issued and outstanding


1,000



1,000Common stock, $.01 par value, 12,500,000 shares

authorized, 9,437,480 and 9,374,303 shares issued

and outstanding


94,375



93,743Preferred Rights


40,000



40,000Additional Paid In Capital


26,580,118



25,475,425Treasury Stock


( 2,385
)


( 2,385
)Common Stock Subscription Receivable


0



0Other Comprehensive Income


1,044,266



1,405,537Accumulated Deficit


( 6,002,516
)


( 6,002,516
)Accumulated Deficit  Since Reentering the Development Stage


(13,471,647
)


(12,851,441
)Total DynaResource, Inc. Stockholders’ Equity


8,283,211



8,159,363Noncontrolling Interest


(1,117,124
)


(1,044,744
)TOTAL EQUITY


7,166,087



7,114,619TOTAL LIABILITIES AND EQUITY

$
7,226,828


$
7,198,522








See accompanying summary of accounting policies and notes to financial statements.











3





DYNARESOURCE, INC.


(An Exploration Stage Company)


Consolidated Statement of Operations


For the Three Months Ended March 31, 2010 and 2009


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


(Unaudited)






Mar 31, 2010


Mar 31, 2009


Cumulative Since

Re-Entering

Development Stage

(Jan. 1, 2007)Three Months EndedREVENUES

$
94,544


$
0


$
135,618COST OF SALESExploration Costs


731,792



410,695



8,898,064GROSS PROFIT (DEFICIT)


(637,249
)


(410,695
)


(8,762,446
)OPERATING EXPENSES:Depreciation and Amortization


37,340



40,339



486,308General and Administrative


335,538



375,985



4,439,188TOTAL OPERATING EXPENSES


372,878



416,324



4,925,496NET OPERATING INCOME (LOSS)


(1,010,127
)


(827,019
)


(13,687,942
)OTHER INCOME (EXPENSE)Portfolio Income


998



1,838



18,583Other income


0



0



2,104TOTAL OTHER INCOME (EXPENSE)


998



1,838



20,687NET INCOME (LOSS) BEFORE INCOME TAXES


(1,009,129
)


(825,181
)


(13,667,255
)Provision for Income Taxes (Expense)  Benefit


0



0



38,259NET LOSS


(1.009,129
)


(825,181
)


(13,628,997
)Net Loss Attributable to Non-Controlling Interest


162,434



127,616



1,552,158NET LOSS ATTRIBUTABLE TO DYNARESOURCE, INC. COMMON SHAREHOLDERS


(846,695
)


(697,565
)


(12,076,839
)COMPREHENSIVE INCOME (LOSS):Currency Translation Gain (Loss)


226,489



(264,755
)


(1,394,808
)COMPREHENISVE LOSS BEFORE NON-CONTROLLING INTEREST


(620,206
)


(962,320
)


(13,471,647
)Comprehensive Loss (Income) Attributable to Non-Controlling Interest


(50,054
)


66,189



293,706COMPREHENSIVE LOSS ATTRIBUTABLE TO DYNARESOURCE, INC. COMMON SHAREHOLDERS

$
(670,260
)

$
(896,131
)

$
(13,177,941
)EARNINGS PER SHARE, Basic and dilutedWeighted Average Shares Outstanding, Basic and Diluted


9,408,360



9,073,913Weighted AverageShares Outstanding:Basic and Diluted

$
(0.07
)

$
(0.10
)








See accompanying summary of accounting policies and notes to financial statements.





4





DYNARESOURCE, INC.


(An Exploration Stage Company)


Consolidated Statements of Cash Flows


For the Three Months Ended March 31, 2010 and 2009


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


(Unaudited)




Three Months

Ended

Mar 31, 2010

Three Months

Ended

Mar 31, 2009


Cumulative

Since Re-entering

Development

Stage

(Jan 1, 2007)CASH FLOWS FROM OPERATING ACTIVITIESNet loss
$
(1,009,129
)
$
(825,181
)

$
(13,628,997
)Adjustments to reconcile net deficit to cash used

by operating activities:Issuance of Common Stock for Services

0


0



685,938Issuance of Preferred Stock for Services

0


0



1,000Depreciation and Amortization

37,340


40,339



486,308Loss on Disposition of Fixed Assets

0


0



28,006Change in assets and liabilities:Decrease in Accounts Receivable

0


0



199,143Decrease in Accounts Receivable – Related Party

0


0



(50,760
)Decrease (Increase)  in Foreign Tax Receivable

(2,878
)

123,678



(73,883
)(Increase) in Other Current Assets

(25,616
)

(78,823
)


(165,661
)(Increase) in Deposits

(25
)

0



(6,691
)(Decrease) in Accounts Payable

(13,282
)

(49,870
)


(14,100
)(Decrease) Increase in Accrued Expenses

(9,880
)

660



(70,699
)(Decrease) in Deferred Tax Liability

0


0



(38,259
)CASH FLOWS FROM (USED) OPERATING ACTIVITIES

(1,023,470
)

(789,197
)


(12,648,655
)CASH FLOWS USED IN INVESTING ACTIVITIESPurchase of Fixed Assets, net

(27,081
)

(12,119
)


(308,575
)Retirement of Fixed Assets

0


0



10,124Investment in affiliate

(250,000
)

(300,000
)


(750,000
)CASH FLOWS USED IN INVESTING ACTIVITIES

(277,081
)

(312,119
)


(1,048,451
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from DynaMexico Earn In

900,000


800,000



10,442,985Proceeds from sale of common stock

205,325


0



3,867,917Repurchase of common stock options

0


0



(10,000
)Other comprehensive income (loss)

(271,217
)

410,695



1,345,002Purchase of treasury stock

0


0



(230,790
)Sale of treasury stock

0


0



256,514Repayment of common stock receivable

0


125,000



0CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

834,108


1,335,695



15,671,628Effect of exchange rate on cash

226,489


(264,755
)


(1,394,808
)NET INCREASE (DECREASE) IN CASH

(239,954
)

(30,376
)


579,714Cash, beginning of period

1,640,508


2,339,561



820,840Cash, end of period
$
1,400,554

$
2,309,185


$
1,400,554SUPPLEMENTAL CASH FLOW INFORMATIONInterest paid
$
0

$
0


$
0Income taxes paid
$
0

$
0


$
0Non-cash dividend of property
$
0

$
0


$
129,822








See accompanying summary of accounting policies and notes to financial statements.





5






DYNARESOURCE, INC. (An Exploration Stage Company)


Notes to the Consolidated Financial Statements


March 31, 2010


(Unaudited)








NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES





Nature of Activities, History and Organization:





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





In 2000, the Company formed a wholly owned subsidiary, DynaResource de Mexico S.A. de C.V. chartered in Mexico (“DynaMexico”).  This Company was formed to acquire, invest in and develop resource properties in Mexico.  In 2005, the Company formed DynaResource Operaciones de San Jose De Gracia S.A. de C.V. (“DynaOperaciones”) and acquired effective control of Mineras de DynaResource S.A. de C.V. (formerly Minera Finesterre, S.A. de C.V.) (“MinerasDyna”).  The Company owns 25% of Mineras and acquired effective control of Mineras by acquiring the option to purchase the remaining 75% of the shares of Mineras for seventy-five pesos (approximately $5.50 in United States dollars, as of December 31, 2009).  The Agreement also provided that the other shareholders relinquish and forfeit any and all rights, interests and claims in and to the Corporation and in or to any of the rights or assets owned or controlled by the Corporation.  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 ownership of DynaMexico to Goldgroup Resources Inc., (“Goldgroup”) in exchange for a $3,000,000 cash contribution and exploration expenditures at the San Jose de Gracia property (“SJG”), and in August 2008, the Company transferred an additional 10% of the ownership of DynaMexico to Goldgroup in exchange for an additional $3,000,000 cash and exploration expenditures (See Note 5 below).  Through March 31, 2010, Goldgroup has contributed $10,767,990 to DynaMexico, and it currently owns 25% of DynaMexico.





The Company produced approximately $7,000,000 in revenues from production activities during the years ended December 31, 2003 through 2006, and suspended this activity voluntarily to concentrate its efforts on exploration and development. In accordance with that decision, as of January 1, 2007, the Company reentered the Exploration Stage and has presented its cumulative results since reentering the Exploration Stage, in accordance with Accounting Standards Codification (“ASC”) 915 “Development Stage Enterprises”, (formerly Statement of Financial Accounting Standard (“SFAS No. 7”), and will continue this presentation until it again has revenues from operations.





Unaudited Interim Financial Statements:





The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (“SEC”) regulations for interim financial information. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the balance sheets, statements of operations and statements of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure for the preceding fiscal year contained in the Form 10, with amendments, that was effective on July 15, 2008.   Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.








6





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. It is also necessary for management to determine, measure, and allocate resources and obligations within the financial process according to those principles.  The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.





The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company's system of internal  accounting control is designed to assure, among other items, that  1) recorded  transactions  are valid;  2) valid  transactions  are recorded;  and  3) transactions  are  recorded in the proper  period in a timely  manner to produce financial  statements which present fairly the financial  condition,  results of operations  and cash  flows of the  Company  for the  respective  periods  being presented.





Management believes that all adjustments necessary for a fair statement of the results of the three months ended March 31, 2010and 2008 have been made.





FASB Accounting Standards Codification





In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance concerning the organization of authoritative guidance under U.S. Generally Accepted Accounting Principles (“GAAP”).  This new guidance created the GASB Accounting Standards Codification (“the Codification” or “ASC”).  The Codification has become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  The Codification became effective for the Company in its quarter ended September 30, 2009.  As the Codification is not intended to change or alter existing U.S. GAAP, it did not have any impact on the Company’s consolidated financial statements.  On its effective date, the Codification superseded all then-existing non-SEC accounting and reporting standards.  All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.





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.





Reclassification:





Certain amounts have been reclassified to conform to current year presentation.





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 subsidiary’s functional currency is the U.S. dollar. 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 recorded in other comprehensive (loss) income.








7





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 three months ended March 31, 2010 (Mexican pesos per one U.S. dollar):




March 31, 2010Current exchange rate
Pesos.


12.41500Weighted average exchange rate for the nine months ended
Pesos.


13.03880





Cash and Cash Equivalents:





The Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents.  At times, cash balances may be in excess of the FDIC insurance limits.  The carrying amount approximates fair market value.





Accounts Receivable and Allowance for Doubtful Accounts:





The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection.  No allowance has been established as all receivables were deemed to be fully collectible.





Foreign Tax Receivable:





Foreign Tax Receivable (IVA) is comprised of recoverable value-added taxes charged by the Mexican government on goods and services rendered.  Under certain circumstances, these taxes are recoverable by filing a tax return.  Amounts paid for IVA are tracked and held as receivables until the funds are remitted.  The total amount of IVA receivable as of March 31, 2010 and 2009 were $123,088 and $120,210, respectively.





Inventory:





As the Company ceased production in 2006, there is no inventory, as of March 31, 2010 and December 31, 2009.





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 34 concessions at the San Jose de Gracia property the basis of which are deferred until the properties are brought into production, at which time they will be amortized on the unit of production method based on estimated recoverable reserves.  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.









8




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.





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. If such indication of impairment exists, the asset’s recoverable amount will be reduced to its estimated fair value. As of December 31, 2009 no indications of impairment existed.





Use of Estimates:





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





Revenue Recognition:





The Company recognizes revenue 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 (Loss) per Common Share:





“Earnings (loss) per share” is calculated in accordance with ASC 260 “Earnings Per Share”(Formerly SFAS No. 128, “Earnings per Share.”(“SFAS No. 128”)) The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share.  “Diluted earnings per share” is 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.





As the Company incurred a net loss during the three months ended March 31, 2010 and 2009, the basic and diluted loss per common share is the same.   As discussed in Note 8, and as of March 31, 2010, the Company had 630,092 stock options outstanding that could potentially have a dilutive effect on basic earnings per share in the future.





Comprehensive Income:





ACS 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.








9





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.





Fair Value of Financial Instruments:





In accordance with the reporting requirements of ASC 820 “Fair Value Measurement and Disclosures”, (formerly SFAS No. 157, Disclosures About Fair Value of Financial Instruments), the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.  As of March 31, 2010 the Company did not have any financial instruments other than cash and cash equivalents.








NOTE 2 – FIXED ASSETS





Fixed assets are stated at cost and consist of the following at March 31, 2010:





Mining camp equipment and fixtures

$
492,581Transportation equipment


191,925Lab equipment


14,306Machinery and equipment


90,950Office furniture and fixtures


75,826Office equipment


4,083Computer equipment


32,250Sub-total

$
901,921Less: Accumulated depreciation


(548,371
)Total

$
353,550





Depreciation has been provided over each asset’s estimated useful life. Depreciation expense was $23,947 and $16,885 for the three months ended March 31, 2010 and 2009 respectively,








NOTE 3 – MINING PROPERTIES





Mining properties consist of the following at March 31, 2010:





San Jose de Gracia:Mining concessions

$
4,703,367Less: Accumulated amortization


( 403,934
)Total

$
4,299,433





Amortization expense was $13,393 and $23,454 for the three months ended March 31, 2010 and 2009, respectively.








NOTE 4 – 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.









10




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 March 31, 2010 are as follows:





March 31,

2010Net deferred tax assets attributable to:Prior years

$
3,244,101Tax benefit (liability) for current year


343,104Total Deferred Tax Benefit


3,587,205Valuation Allowance


(3,587,205
)Net Deferred Tax Benefit

$
0





The realization of deferred tax benefits is contingent upon future earnings and is fully reserved at March 31, 2010.








NOTE 5 – MATERIAL AGREEMENTS





Concessions and Interest related to the San Jose de Gracia Property:





In March 2000, The Company entered into agreements to complete the acquisition and consolidation of 100% of the San Jose de Gracia Property and related mining interests.  Pursuant to these agreements, the Mining Concessions and related interests comprising the San Jose de Gracia property were transferred to 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, Inc. (“DynaResource”) and DynaResource de Mexico S.A. de C.V. (“DynaMexico”), (“Seller”); and Goldgroup Resources, Inc., of Vancouver, British Columbia (“Goldgroup”), (“Buyer”), and Together, (“the Parties”).





The Earn In provides for the sale of up to fifty percent (50%) of the total outstanding shares of DynaMexico, the wholly owned subsidiary of DynaResource, and the owner of the San Jose de Gracia District in northern Sinaloa Mexico (“SJG”); in exchange for the total cash contributions to DynaMexico, and expenditures related to the development of the SJG, in the amount of $18,000,000 by Goldgroup; contributed in four (4) phases, as set forth below:





Phase
On or before
Amount of Funds to be

deposited to

DynaMexico (For SJG Expenditures)
Interest Earned

(by Goldgroup in

DynaMexico)
Cumulative Interest

Earned (by

Goldgroup in DynaMexico)1.
June 15, 2007
$1,000,000
0%
0%;  Completed2.
March 15, 2008
$2,000,000
15%
15%;  Completed3.
September 15, 2009
$3,000,000
10%
25%;  Completed4.
March 15, 2011
$12,000,000
25%
50%








Pursuant to the Earn In Agreement:





·
DynaResource attached the “SJG Title Opinion”, compiled by Urias Romero Y Asociados, Abraham Urias, Mazatlan, Sinaloa, with attachments and schedules; describing the status and position of DynaMexico and affiliates in Mexico, and confirming the ownership and status of the Mining Concessions comprising the SJG District in Sinaloa, Mexico;








11





·
DynaResource attached its audited, consolidated financial statements at December 31, 2005;





·
The Parties agree 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.








Phases 1, 2 and 3 of Earn In Completed:





Activities related to the exploration and development of SJG are being conducted by DynaMexico, through contract to the operating subsidiary 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”).





On December 28, 2007 Goldgroup completed Phase II of the Earn In Agreement, through the contributions of Capital of $3,368,088 to DynaMexico and the expenditures related to the exploration of SJG of 27,063,453 Mexican pesos, with the remainder held in cash in DynaMexico, In January 2008, 15% of the Shares of DynaMexico were transferred to Goldgroup.





On July 16, 2008, the Goldgroup completed Phase III of the Earn In Agreement through total contributions of capital under the Earn In Agreement of $6,118,009 with total expenditures related to the exploration of SJG of $57,252,898 Mexican pesos, with the remainder held in cash in DynaMexico, In January 2008, 15% of the Shares of DynaMexico were transferred to Goldgroup.  In August 2008, an additional 10% of the Shares of DynaMexico were transferred to Goldgroup, so that Goldgroup now owns 25% of DynaMexico.





Continuing with Phase IV exploration activities, as of March 31, 2010 the Company reported total deposits to DynaMexico by Goldgroup in excess of $10,767,990 USD, with total expenditures through DynaMexico of approximately 118,786,701 Mexican pesos.





MATERIAL AGREEMENT (MOU):





In order to clarify and confirm the operating structure at SJG, DynaResource, Inc., DynaResource de Mexico, and Goldgroup Resources Inc. (the Parties to the Earn In / Option Agreement;  and “the Parties”) entered into a “Memorandum of Understanding”, (the “MOU”), dated July 29, 2008 (See “MOU”).  The MOU provides for:





·
Mineras de DynaResource is the exclusive operating entity at SJG, pursuant to the operating agreement with DynaResource de Mexico;








12





·
DynaResource de Mexico owns the SJG 100%, and all Data and information pursuant thereto;  any information disseminated regarding SJG must be disclosed as from DynaResource de Mexico;





·
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, Mineras, or DynaOperaciones;





·
The SJG Management Committee does not have the authority to act for or represent DynaMexico, Mineras, Operaciones, or the SJG Property;





·
All personnel must be employed or contracted through Mineras or Operaciones and be accountable to the employing / contracting entity;








NOTE 6 – RELATED PARTY TRANSACTIONS





In the three months ended March 31, 2010 and 2009, the Company paid $37,500 and $0 respectively to Dynacap Group, Ltd. (an entity controlled by officers of the Company) for consulting and other fees.





In addition, the Company issued common stock to the following related parties:





Three months ended March 31, 2010


Year ended

December 31, 2009Directors

$
0


$
65,000Consultants

$
0


$
81,250Totals

$
0


$
141,250








NOTE 7 – NOTE RECEIVABLE - AFFILIATE





Through March 31, 2010, the Company loaned a total of $750,000 to DynaResource Nevada, Inc., a Nevada Corporation, with one operating subsidiary in Mexico, DynaNevada de Mexico, SA de CV.  The terms of the Note Receivable provide for a “Convertible Loan”, repayable at 5 % interest over a 3 year period, and convertible at the Company’s option into Common Stock of DynaResource Nevada, Inc. at $ .25 / Share.  DynaResource Nevada, Inc. is a related entity, and through its subsidiary in Mexico, has entered into an Option agreement with Grupo Mexico (IMMSA) in Mexico, for the exploration and development of approximately 3,000 hectares in the State of San Luis Potosi.








NOTE 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 shares have full voting rights.  In October 2007, the Company issued 1,000 shares of Preferred A shares to its CEO.  These shares have the right to elect a majority of the Board of Directors.  There were 1,000 and 1,000 shares outstanding at March 31, 2010 and December 31, 2009, respectively.




Common Stock





The Company is authorized to issue 12,500,000 common share stocks at a par value of $0.01 per share.  These shares have full voting rights.  At March 31, 2010 and at December 31, 2009, there were 9,437,480 and 9,374,303 shares outstanding, respectively.








13





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, leaving a balance of $226,188.  As of December 31, 2005, $186,188 has been repaid, leaving a balance of $40,000. At March 31, 2010 the balance remains at $40,000.





Treasury Stock





Treasury stock is accounted for by the cost method.  The Company may from time to time purchase and resell its own common stock.  Treasury stock activity is presented in the consolidated statement of stockholders’ equity.





Options and Warrants





There are 630,092 options outstanding at March 31, 2010.  All of the options entitle the holder to purchase one share of the Company’s common stock at a price of $5.00 per share. The options expire November 15, 2010.  No options were exercised or cancelled since issuance.





The Company’s stock price was $3.25 at March 31, 2010 and none of the Company’s options would have been considered dilutive if the Company had not incurred a net loss.








NOTE 9 – NON-CONTROLLING INTEREST





The Company’s Noncontrolling Interest recorded in the unaudited consolidated financial statements relates to a 25% interest in DynaResource de Mexico, S.A. de C.V. Changes in Noncontrolling Interest for the three months ended March 31, 2010 and 2009 was as follows:






For the ThreeMonths

Ended March 31,2010


2009Beginning balance

$
(1,004,744
)

$
(589,754
)Operating income (loss)


(162,434
)


(127,616
)Other comprehensive income (loss)


50,054



(66,189
)Ending balance

$
(1,117,124
)

$
(783,599
)





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








NOTE 10 – EMPLOYEE BENEFIT PLANS





There is currently no qualified or non-qualified employee pension, profit sharing, stock option, or other plans authorized for any class of employees.








NOTE 11 – 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 based upon the land area, as well as the age of the concessions. Amounts spent in excess of the minimum amounts may be carried forward indefinitely over the life of the concessions, and are adjusted annually for inflation. Based on Management's business plans, the Company does not expect any difficulty in meeting the minimum annual expenditures for the concessions, and the Company retains sufficient carry-forward amounts to cover over 20 years of minimum expenditures, as calculated for the 2009 minimum expenditures, adjusted for inflation of 4%.








14





In September 2008, the Company entered into a 37 month lease agreement for its corporate office. The Company paid rent expense of $11,581 and $11,795 for the three months ended March 31, 2010 and 2009 respectively.





The following is a schedule of minimum lease payments required under the existing lease as of March 31, 2010:








Year Ended December 31

Amount2010

$
26,2322011


31,5012012


0$
57,733








NOTE 12 – RECENT ACCOUNTING PRONOUCEMENTS





In 2009, the FASB issued the following guidance:





SFAS No. 166:  "Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140", which was codified into ASC 860, and was effective for the Company as of January 1, 2010.





SFAS No. 167:  "Accounting for Transfers of Financial Assets",which was codified into ASC 810-10, and was effective for the Company as of January 1, 2010.





FSP No. FAS 107-1 and APB 28-1:  “Interim Disclosures about Fair Value of Financial Instruments”, which was codified into ASC 825.





FSP No. FAS 115-2 and FAS 124-2:  “Recognition and Presentation of Other-Than-Temporary Impairments”, which was codified into ASC 320-10-65-4.





FSP No. FAS 157-4:   “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, which was codified into ASC 820-10-65-4.





Management has reviewed these new standards and believes they had or will have no material impact on the financial statements of the Company.








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.








15





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 March 31, 2010, the Company’s financial assets and liabilities are measured at fair value using Level 3 inputs, with the exception of cash.








NOTE 14 – SUBSEQUENT EVENTS





In May 2009, the FASB issued ASC 855-10, “Subsequent Events”, (formerly SFAS No. 165, “Subsequent Events,” which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The pronouncement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether that date represents the date the financial statements were issued or were available to be issued.  In conjunction with the preparation of these financial statements, an evaluation of subsequent events was performed through May 13, 2010, which is the date the financial statements were issued.





On April 23, 2010, Goldgroup deposited an additional $400,000 pursuant to the Earn-In Agreement discussed in Note 5.





No other reportable subsequent events were noted.





16






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’s majority owned (currently 75 %) subsidiary, DynaResource de Mexico, S.A. de C.V. (“DynaMexico”), owns 100% of the mineral concessions and related interest to the San Jose de Gracia mining property covering approximately 99,500 hectares located in and around San Jose de Gracia, Sinaloa State, Mexico (“SJG”). SJG is located on the west side of the Sierra Madre Mountains, approximately 100 kilometers inland from Guamuchil and approximately 200 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.  DynaMexico is focused on the exploration 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




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 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 outline the presence of ore shoots developed within the veins.  The ore shoots appear to be controlled by dilational jogs and/or vein intersections. A total of 544 samples were collected in 1999-2000, and assayed an average 6.51 grams/ton gold.





Acquisition and Consolidation / SJG





In 2000, the Company formed DynaMexico to acquire, invest in, explore and develop mining concessions in Mexico, and to acquire the ownership and interests related to San Jose de Gracia.  In March 2000, the Company and DynaMexico entered into agreements to acquire and consolidate 100% of the San Jose de Gracia Property. The Company agreed to issue 2,493,271 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, the number of shares to be 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, DynaMexico 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.  DynaMexico 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.





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, commercially mineable ore body (s).








17





Recent Financing Activity





As gold prices continued to appreciate into 2006, exploration financing opportunities increased and the Company and DynaMexico negotiated and entered into the “Earn In / Option agreement with Goldgroup Resources, Inc., Vancouver, BC, dated September 1, 2006.  The Terms of the Earn In / Option agreement provides for $ 18 M. USD financing from Goldgroup to DynaMexico, over four Phases (through March 2011), and related exploration expenditures at SJG, in exchange for Goldgroup’s earning of 50 % of the Shares of DynaMexico.  The terms of the Earn In / Option also provided for the involvement of proven industry professionals in the SJG project.  (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 4 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 4 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.





2009 REVIEW





Magnetic and IP Surveys





In January 2009, MinerasDyna contracted an Engineering firm in Tucson, AZ., to conduct Magnetic and IP surveys throughout the SJG district; 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.








18





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 New, 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;





Structural Geologist





In February 2009, DynaOperaciones retained a geological consultant, Jonathan Cordery, with prior experience in Mexico, to review and Map 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 recent (2007-2008) drill core and drill logs through drill hole # 08-126.  Final Reports and maps have been received; and the results and analysis are being utilized in planning drilling programs at SJG.   Information contained in the preliminary reports is described below:





Current Dimensions of Resource Areas at SJG:





San Pablo:
Recent Production of 18,250 Oz. at average grade of 20 g/t;  Strike length of 750 M and down dip extension of 500 M; with selected mineralized intercepts of:





(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:        Strike Length of 365 M and down dip extension of 210 M; with selected intercepts of:





(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;








19





Orange Tree:         to be defined; with selected intercepts of:





(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):     to be defined; with selected intercepts of:





(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:               Strike Length of 400 M and down dip extension of 350 M; with selected intercepts of:





(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:
Strike Length of 270 M and down dip of 180 M; Strike of 800 M including Drill Hole # 97-55; with selected intercepts of:





(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);  7.7 M of 1.86 g/t; including 2.1 M of 5. 18 g/t;





(SJG 97-55);  5 M of 3.5 g/t; including 3 M of 5.24 g/t;





La Purisima:
Historical Production of 470,000 Oz. Au, at average grade of 66.7 g/t;  Strike Length of 720 M and down dip extension of 420 M; with selected intercepts of:





(SJG 07-21);  8 M of 20.67 g/t;  including 6 M of 26., 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;  Dimensions of 100 M by 50 M, to be defined;





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.





Follow up Drilling at Major Target Areas:





Tres Amigos:
Down dip extension; extension southwest through La Cecena, Los Hilos; Extension Northeast across Orange Tree;





La Union:
Extension along strike and down dip;





La Purisima:
Extension along strike and down dip;








20





Palos Chinos:
Extension along strike and down dip;





La Prieta:
to be defined;








Drilling Highlights by specific target area of SJG:





The following drilling highlights are included by target area, and for the period through December 31, 2009:





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 (60 Degree Hole);  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;








21





·
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;





·
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.





Company Management believes the recent drilling at San Pablo 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 for 2010.  A 43-101 compliant Technical Report is planned in 2010 and which is expected to confirm the Company’s estimates.





Northwest Down Dip of Tres Amigos





·
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).;








22





·
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.;





Southwest Tres Amigos towards La Cecena;  Extending Tres Amigos SW towards LA Cecena:





·
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.;





1997 – 1998 Drilling at Tres Amigos:





·
’97-01:
7 M. of 3.66 g/t., Including 2.5 M. of 7.15 g/t., and Including 1 M. of 11.09 g/t.,;





·
’97-02:
18.5 M. of 3.53 g/t., Including 10 M. of 3.86 g/t., and Including 3.5 M. of 6.85 g/t., and Including 1.5 M. of 12.23 g/t.;





·
’97-03:
4. M. of 4.13 g/t., Including 2 M. of 7.22 g/t.;





·
’97-05:
1.9 M. of 3.62 g/t.;





·
’97-06:
1.85 M. of 6.47 g/t.;





·
’97-07:
10 M. of 3.42 g/t., Including 2.15 M. of 6.82 g/t.;  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.;








23





·
’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 2 M. 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 (La Cecena):
2 M. of 5.02g/t.;  5 M. of 3.92 g/t., Including 2. M. of 8.53 g/t.;





Company Management believes the 1997 – 1998 Drilling at Tres Amigos, and the recent drilling in 2008 and 2009, has defined a sizeable Inferred Resource at Tres Amigos.  Infill drilling and further extensions to Tres Amigos are projected for 2010.  A 43-101 compliant Technical Report is planned in 2010.





La Cecena (Approximately 350 Meters Southwest of the NE Tres Amigos Area):





·
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.;





·
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.;





Company Management believes the La Cecena will be further defined as the continuation of the NE Tres Amigos, thereby extending NE Tres Amigos Area  + 350 Meters to the southwest.





La Purisima:





·
SJG07-21;
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;





·
DDH 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.;








24





·
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;





Company Management believes the recent drilling at La Purisima in 2007-9, has defined a sizeable Inferred Resource at La Purisima (+ 200,000 Oz. Au.).  Infill drilling and further extensions to La Purisima are projected for 2010. A 43-101 compliant Technical Report is planned in 2010.





La Union:





·
’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;





·
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;





Company Management believes the recent drilling at La Union in 2007-9, has defined a sizeable Inferred Resource at La Union (+ 100,000 Oz. Au.  Infill drilling and further extensions to La Union are projected for 2010. A 43-101 compliant Technical Report is planned in 2010.








25





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.;





Other Target Areas at SJG remain virtually unexplored:





·
La Prieta;





·
Rudolpho;





·
Rosario;





·
Argillic Zone;








These drilling Results obtained through Phases 1, 2, 3, and continuing in Phase 4 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 Phase 4 drilling will be targeted at Tres Amigos, La Prieta, La Union, La Purisima, and San Pablo. In 2010, the Company expects to commission a 43-101 compliant report of the Resources defined at SJG.








Drill Highlights – 4thQuarter 2009 (October 1 – December 31, 2009)





The Following drill highlights are reported for the period October 1 – December 31, 2009;





San Pablo:





·
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 09-133;
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 09-135;
4.42 M. of 3.63 g/t (5.35 AU Equivalent), including 1 M. of 8.96 g/t.;





·
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;








26





First Quarter 2010





Continuing with Phase 4 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 has been completed in 168 core drill holes, financed pursuant to the Earn In Agreement. 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, 2010 can be viewed on the website of the SEC at:





http://sec.gov/Archives/edgar/data/1111741/000112178109000078/ex99three.htm








Drill Highlights; First Quarter 2010:





San Pablo





·
SJG 10-149:
1.3 M. – 4.8 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;




Tres Amigos / La Cecena




·
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”);







Palos Chinos / La Purisima







·
SJG 10-161:
7.6 M. – 4.64 g/t;
Including 1.6 M. – 18.88 g/t;







DynaMexico Summary of Drilling Results





The drilling results obtained to date confirm the extension of mineralization, down dip of historical workings at SJG, with confirmation of high grade gold (+ 10 g/t) which are consistent with historical and recent production. Specifically, San Pablo, Tres Amigos, La Purisima, and La Union areas have reported significant results.  (Note Drill Summary file referred to above.)  Continued Phase 4 drilling will be targeted at Tres Amigos, San Pablo, La Prieta, La Union and La Purisima.





Company Interpretations and Estimates





In some areas of SJG, topography has prevented the drilling of holes on conventional 50 M. Spacing.  In some areas, the distance between drilled holes is + 100 M.  In these areas, DynaMexico is considering the building of new roads in order to complete in-fill drill holes.  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 mineable 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.  DynaMexico expects to confirm Au. OZ. in the future, under the guidelines and description of a 43-101 technical report.








27





Block Model in Surpac





While the company has completed 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 mineable resources at San Pablo, Tres Amigos, La Union, Palos Chinos, and La Purisima; with portions of the currently mineable resource in a high grade category. The Company will continue this Surpac modeling work as additional drill programs are planned and completed.





Technical Report of Resources





In 2010, the Company expects DynaMexico 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.   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, 2010.





Structure of Company / Operations





Activities in Mexico are conducted by DynaMexico, through Contract 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 Mexico; while Chairman / CEO K.D. Diepholz is the President of each of the 3 companies.





Competitive Advantage





The Company, through its subsidiaries, has been conducting business in Mexico 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 Mexico gives it a competitive advantage, even though many competitors may be larger and have more capital resources.





Drilling Programs





Further drilling programs at SJG are expected to continue in 2010, 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.  A 20,000 Meter drill program is being carried out and projected for completion at June 30, 2010.  Subsequently, the next 30,000 Meters drilling at SJG will be programmed, with the completion date expected at March 15, 2011. 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 $ 900,000 USD to DynaMexico, in the quarter ending March 31, 2010.  And, Goldgroup contributed $ 400,000 USD to DynaMexico on April 23, 2010; this deposit will be credited in the period April 1 – June 30, 2010. The total capital contributed by Goldgroup to DynaMexico at March 31, 2010 was $ 10,767,990 USD.








28





Note Receivable – Affiliate





In the quarter ending March 31, 2010, the Company loaned a total of $ 250,000  to  DynaResource Nevada, Inc., a Nevada Corporation, with one operating subsidiary in Mexico, DynaNevada de Mexico, SA. de CV.   The Total amount loaned by the Company to DynaResource Nevada, Inc. at March 31, 2010 is $ 750,000. USD.  The terms of the Note Receivable provide for a “Convertible Loan”, repayable at 5 % interest over a 3 year period, and convertible at the Company’s option into Common Stock of DynaResource Nevada, Inc. at $ .25 / Share.  DynaResource Nevada, Inc. is a related entity, and through its subsidiary in Mexico, has entered into an Option agreement with Grupo Mexico (IMMSA) in Mexico, for the exploration and development of approximately 3,000 hectares in the State of San Luis Potosi.





Competition





DynaMexico retains 100 % of the rights to concessions over the area of the San Jose de Gracia property and currently sees no competition for mining on the lands covered by those concessions.  If DynaMexico 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 DynaMexico would depend upon these global market prices, less processing charges and any deductions.





POTENTIAL RISKS





Funding from Goldgroup Resources Inc.:





Funding for the exploration activity at SJG is primarily due to the Capital contributions to DynaMexico from Goldgroup Resources Inc. There is no certainty that this funding will continue or that the Earn In / Option Agreement will be completed.  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 DynaMexico (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 Resources Inc.  Goldgroup carries the majority of seats on the SJG Management Committee, which is charged with responsibility of approving the budgets and approving technical plans to the SJG Project.  Concurrently, MinerasDyna has been named the exclusive operator of the SJG Project; and MinerasDyna is managed by officers of DynaResource.  Also, DynaResource carries a majority of the seats on the Board of Directors of DynaMexico, and 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 DynaMexico, 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 of mineable ore at SJG;   there is no certainty that the Company’s opinion will be proven correct.  If a mineable resource is not confirmed at SJG, the Company’s investment at SJG could be at risk.





Company Interpretations and Estimates




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.








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Feasibility Study




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




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





Goldgroup has completed Phases I, II, and III of the Earn In / Option Agreement, and as a result has been transferred 25 % of the Shares and ownership of DynaResource de Mexico.  Should Goldgroup complete Phase IV of the Earn In / Option Agreement (through the contribution and expenditure of a total of $ 18,000,000 USD.); Goldgroup would receive an additional 25 % of the shares and ownership of DynaResource de Mexico (Total of 50 %).  In such case DynaResource, Inc. and its shareholders will only retain 50 % of the shares and ownership of DynaResource de Mexico.  Investors in the Company’s shares should be aware that any benefits to be derived from the ownership of DynaResource de Mexico would be shared 50 % with Goldgroup.





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 Mexico.





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 MONTHS ENDED March 31, 2010





REVENUE.  Revenue for the three months ended March 31, 2010 was $94,544 and the three months ended March 31, 2009 was $0.  This income was produced by providing exploration work for a related entity. The company ceased its 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 $731,792 and $410,695 for the three months ended March 31, 2010 and 2009 respectively.  The increase in costs was due to the increase in exploration and drilling activity in the first quarter 2010.





OPERATING EXPENSES. Operating expenses for the three months ended March 31, 2010, were $372,878 compared to expenses for the three months ended March 31, 2009 of $416,324. The above expenses include depreciation and amortization amounts of $37,340 and $40,339 for the three months ended March 31, 2010 and 2009, respectively.





OTHER INCOME (EXPENSE). Other income for the three months ended March 31, 2010 was $998 compared $1,838 for the same period ended March 31, 2009.








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NON-CONTROLLING INTEREST. The non-controlling interest portion of our net loss for the three months ended March 31, 2010 was $162,434 compared to $127,616 for the three months ended March 31, 2009. This is due to the company’s reporting a greater loss than in 2009 and therefore a smaller portion allocated to our minority interest holder.





COMPREHENSIVE (LOSS). Comprehensive loss includes the company’s net loss plus the currency translation gain (loss) for the period which was negative $620,206 for the three months ended March 31, 2010 compared to negative $962,320 for the same period ended March 31, 2009.





LIQUIDITY AND CAPITAL RESOURCES. The Company has sufficient capital on hand to fund overhead operations for the next two years.   Goldgroup is funding the exploration activities at SJG in accordance with the Earn-In Agreement.  In December, 2009, Goldgroup advised the Company that they have funds on hand to complete their option under the Earn-In Agreement.





PLAN OF OPERATION





Future Capital Contributions and Expenditures





Pursuant to the terms of the Earn In / Option Agreement, Goldgroup is to contribute and expend a total of $ 18 M. USD, to DynaMexico, on or before March 15, 2011.  As of March 31, 2010, Goldgroup had contributed $10,767,990 USD and the balance in capital to be contributed by Goldgroup is $7,232,010 USD.  The company expects these funds to be contributed by Goldgroup over the next 15 months, and with subsequent exploration expenditures by DynaMexico at SJG.  While this future contribution of Capital to DynaMexico would dilute the shares of DynaMexico; it will not dilute the shares of DynaResource, Inc.





2010 Drilling Programs





A 20,000 Meter Drilling program is being carried out and expected for completion at June 30, 2010.  Subsequently, an additional 30,000 Meter drilling program will be programmed. 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 / Rosario / Rudolpho. And, the company expects extensions to mineralization in all directions and down dip from the main target areas.





Mineable “Resource” at San Jose de Gracia





The Company believes that DynaMexico 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 2009-10, the Company expects DynaMexico 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.   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, 2010.





Future Feasibility Study





Considering 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 in the future.  At the completion of the Earn In Agreement (defined by agreement at March 2011), and at the completion of the drilling programs funded pursuant to the Terms of the Earn In Agreement, the Company expects DynaMexico to complete a Feasibility Study to confirm and define the full scale production plans at SJG.








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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 March 31, 2010.  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 March 31, 2010, our Chief Executive Officer and Chief Financial Officer as of March 31, 2010, 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 expenses are 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 March 31, 2010.   Based on its evaluation, our management concluded that, as of March 31, 2010, 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.





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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 Exhibit31.1
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: May 11, 2010





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