NOTE 1 Nature of Activities and Significant Accounting Policies | 21 Months Ended |
Sep. 30, 2013 |
Accounting Policies [Abstract] | ' |
NOTE 1 Nature of Activities and Significant Accounting Policies | ' |
NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES |
Nature of Activities, History and Organization: |
DynaResource, Inc. (The “Company”, “DynaResource”, or “DynaUSA”) was organized September 28, 1937, as a California corporation under the name of West Coast Mines, Inc. In 1998, the Company re-domiciled to Delaware and changed its name to DynaResource, Inc. The Company is in the business of acquiring, investing in, and developing precious metal properties, and the production of precious metals. |
In 2000, the Company formed a wholly owned subsidiary, DynaResource de 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 owned 25% of MinerasDyna and acquired effective control of MinerasDyna by acquiring the option to purchase the remaining 75% of the Shares of MinerasDyna. The Company exercised the option and finalized the acquisition of MinerasDyna in January 2010, and now owns 100% of MinerasDyna. The results of DynaMexico, DynaOperaciones and MinerasDyna are consolidated with those of the Company. |
In January 2008, DynaMexico issued 15% of its outstanding common shares to Goldgroup Resources Inc., a subsidiary of Goldgroup Mining Inc., Vancouver, BC. (“Goldgroup”), in exchange for $3,000,000 USD cash contributed for exploration expenditures at the San Jose de Gracia property (“SJG”). In August 2008, DynaMexico issued an additional 10% of its outstanding common shares to Goldgroup in exchange for additional $3,000,000 USD cash for exploration expenditures, and in March 2011, DynaMexico issued an additional 25% of its outstanding common shares to Goldgroup in exchange for additional $12,000,000 USD cash for exploration expenditures (See Note 7 below). At March 2011, Goldgroup had contributed $18,000,000 USD in aggregate to DynaMexico, and it owned 50% of the outstanding common shares of DynaMexico. |
On June 21, 2013, DynaMexico issued 300 Series B Variable Capital Shares in exchange for the settlement of accounts payable to DynaResource in the amount of $2,392,802 USD ($31,090,710 Mexican Pesos). After the issuance and receipt of the 300 Series B Shares, DynaUSA holds 80% of the total outstanding Capital of DynaMexico. |
The Company produced approximately $7,637,150 in revenues from production activities conducted during the years ended December 31, 2003 through 2006, and suspended this activity voluntarily to concentrate its efforts on exploration and development. In accordance with that decision, as of January 1, 2007, the Company reentered the Exploration Stage and has presented its cumulative results since reentering the Exploration Stage, in accordance with Accounting Standards Codification (“ASC”) 915 “Development Stage Entities”, and will continue this presentation until it again has revenues from operations. |
The Company chose to become a voluntary reporting issuer in Canada in order to avail itself of Canadian regulations regarding reporting for mining properties, more specifically, National Instrument 43-101 (NI 43-101). This regulation sets forth standards for reporting resources in a mineral property and is a standard recognized in the mining industry. |
Unaudited Interim Financial Statements: |
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. 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 sheet, statement of operations, statement of stockholders’ equity and statement 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 Company’s Annual Report on Form 10-K. The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and Financial Statements and notes thereto included in the Company’s December 31, 2012 Form 10-K. |
Emerging Growth Company Critical Accounting Policy Disclosure: |
The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company may elect to take advantage of the benefits of this extended transition period in the future. |
Significant Accounting Policies: |
The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenue and expense. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements. |
The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods presented. |
Basis of Presentation: |
The Company prepares its financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States. |
Principles of Consolidation: |
The financial statements include the accounts of DynaResource, Inc. as well as DynaResource de Mexico, S.A. de C.V., DynaResource Operaciones S.A. de C.V. and Mineras de DynaResource S.A. de C.V. All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated. |
Foreign Currency Translation: |
The functional currency for the subsidiaries of the Company is the Mexican peso. As a result, the financial statements of the subsidiaries have been re-measured from Mexican pesos into U.S. dollars using (i) current exchange rates for monetary asset and liability accounts, (ii) historical exchange rates for nonmonetary asset and liability accounts, (iii) historical exchange rates for revenues and expenses associated with nonmonetary assets and liabilities and (iv) the weighted average exchange rate of the reporting period for all other revenues and expenses. In addition, foreign currency transaction gains and losses resulting from U.S. dollar denominated transactions are eliminated. The resulting re-measured gain or loss is reported as a separate component of stockholders’ equity (comprehensive income (loss)). |
The financial statements of the subsidiaries should not be construed as representations that Mexican pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates. |
Relevant exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the periods ended September 30, 2013 and December 31, 2012 (Mexican pesos per one U.S. dollar): |
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| 30-Sep-13 |
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Current exchange rate: | Pesos | 13.13 |
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Weighted average exchange rate for the period ended: | Pesos | 12.67 |
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| 31-Dec-12 | | |
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Current exchange rate: | Pesos | 13.02 | | |
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Weighted average exchange rate for the year ended: | Pesos | 13.16 | | |
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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 Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At September 30, 2013, the Company had a balance of $929,294 that was in excess of the FDIC insurance limit of $250,000. The carrying amount approximates fair market value. |
Accounts Receivable and Allowances for Doubtful Accounts: |
The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. No allowance has been established as all receivables were deemed to be fully collectable. |
Foreign Tax Receivable: |
Foreign Tax Receivable (IVA) is comprised of recoverable value-added taxes charged by the Mexican government on goods and services rendered. Under certain circumstances, these taxes are recoverable by filing a tax return. Amounts paid for IVA are tracked and held as receivables until the funds are remitted. The total amounts of the IVA receivable as of September 30, 2013 and December 31, 2012 are $156,177 and $40,022, respectively. |
Inventory: |
There is no inventory as of September 30, 2013 and December 31, 2012. |
Fixed Assets: |
Fixed assets are carried at cost. Depreciation is provided over each asset’s estimated useful life. Upon retirement and disposal, the asset cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the determination of the net income. Expenditures for geological and engineering studies, maintenance and claim renewals are charged to expense when incurred. Additions and significant improvements are capitalized and depreciated. |
Mining Properties: |
The Company is an ‘Exploration Stage’ company as defined in “SEC Industry Guide 7”. Mining properties consist of 33 mining concessions covering approximately 69,121 hectares, at the San Jose de Gracia property, the basis of which are deferred until the properties are brought into production, at which time they will be amortized on the unit of production method based on estimated recoverable reserves. The Company has elected to expense a minimal amount of amortization due to the effects of exploration activities on the recoverable reserves. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related deferred costs are recorded do not necessarily reflect present or future values. |
The recoverability of the book value of each property will be assessed annually for indicators of impairment such as adverse changes to any of the following: |
| estimated recoverable ounces of gold, silver or other precious minerals; | | | |
| estimated future commodity prices; | | | |
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| estimated expected future operating costs, capital expenditures and reclamation expenditures. | | | |
A write-down to fair value will be recorded when the expected future cash flow is less than the net book value of the property or when events or changes in the property indicate that carrying amounts are not recoverable. This analysis will be completed as needed, and at least annually. As of the date of this filing, no events have occurred that would require write-down of any assets. As of September 30, 2013, no indications of impairment existed. |
Exploration Costs: |
Exploration costs not directly associated with proven reserves on the mining concessions are charged to operations as incurred. Exploration, development, direct field costs and administrative costs are expensed in the period incurred. The carrying amounts of the mining concessions are reviewed at each calendar year end to determine whether there is any indication of impairment or at other times if indications of impairment exist. |
As of September 30, 2013, no indications of impairment existed. |
Advertising Costs: |
The Company incurred no advertising costs for the nine months ended September 30, 2013 and 2012. |
Income Taxes: |
Income is taxed at regular corporate rates per the Internal Revenue Code. Although the Company has tax loss carry-forwards (see Note 5), there is uncertainty as to utilization prior to their expiration. Accordingly, the future income tax asset amounts have been fully offset by a valuation allowance. |
Use of Estimates: |
In order to prepare financial statement in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the financial statements and determines whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. |
Comprehensive Income: |
ASC 220 “Comprehensive Income” establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company’s comprehensive income consists of net income and other comprehensive income (loss), consisting of unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations. For the periods ended September 30, 2013 and 2012, the Company’s components of comprehensive income were foreign currency translation adjustments and unrealized losses on securities held for sale. |
Revenue Recognition: |
The Company recognizes revenue in accordance with ASC 605-10, "Revenue Recognition in Financial Statements". Revenue is recognized when persuasive evidence of an arrangement exists, delivery or service has occurred, the sale price is fixed or determinable and receipt of payment is probable. |
Revenues earned from the sale of precious metal concentrates are recognized as the title to the material is passed to the buyer upon delivery. |
Earnings per Common Share: |
Earnings (loss) per share are calculated in accordance with ASC 260 “Earnings per Share”. The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. Potentially dilutive common shares consist of stock options and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive. |
There were no potentially dilutive common stock equivalents as of September 30, 2013, therefore basic earnings per share equals diluted earnings per share for the period ended September 30, 2013. The Company had 1,151,800 options and warrants outstanding at September 30, 2013. As the Company incurred a net loss during the period ended September 30, 2013, the basic and diluted loss per common share is the same amount, as any common stock equivalents would be considered anti-dilutive. |
As the Company incurred a net loss during the period ended September 30, 2013, the basic and diluted loss per common share is the same amount. As of September 30, 2013, the Company had no stock options outstanding that could potentially have a dilutive effect on basic earnings per share in the future. |
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 13 for a discussion of new accounting pronouncements. |
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