SEC Company Response from DYNARESOURCE, INC. (DYNR) (CIK 0001111741) (DYNR) — May 14, 2009
DYNARESOURCE, INC. (DYNR) (CIK 0001111741)
Date: May 14, 2009 · CIK: 0001111741 · Accession: 0001121781-09-000188
AI Filing Summary & Sentiment
Referenced dates: March 25, 2009
Letter
Division of Corporate Finance Washington, DC 20549 RE: DynaResource, Inc. Form 10 / A; Amendment No. 3; File No. 0-53237
Dear Mr. Schwall, Mr. Madison, Mr. Karney, Mr. Carroll and Mr. White:
We received your letter dated March 25, 2009 with comments to the filed Form 10, Amendment No. 1, for DynaResource, Inc., File No. 0-53237. We have restated your comments below and have included our responses to each comment. And, where applicable, we are including comments in the revised Form 10 / Amendment No. 2
General
1.
We note that your registration statement was automatically effective by operation of law on July 14, 2008; however, you have yet to clear all of our comments. Please bear in mind that you are now a reporting company under the Exchange Act of 1934 and must continue to file all reports required by such Act.
Answer:
The Company is current with all reports required under the Exchange Act of 1934.
2.
We note your Form 10/A includes financial statement5s through September 30, 2008. Please amend your Form 10/A to only include financial statements that are required as of your automatic effective date, specifically audited financial statements for your fiscal year ended 2007 and 2006 and unaudited financials through March 31, 2008. Please also amend your financial statements and related disclosure on Form 10-Q for the periods ended June 30, 2008 and September 30, 2008 to reflect our comments.
Page 1 of
Answer:
The Company has amended its Form 10 (A), Amendment No. 3, to include financial statements required as of the automatic effective date, July 14, 2008. Additionally, the Form 10-Q’s for June 30, 2008 and September 30, 2008 will be amended to reflect your comments, if necessary.
Description of Business, page 2
3.
We note your responses to our prior comments 4 and 5. Your description of business should contain all of the disclosures required under Item 101 of Regulation S-K. In that regard, we note that you have omitted much of the history of share issuances. Further, we note that the history of the Company does not follow a chronological pattern and therefore makes it difficult to follow. Please substantially revise your description of business to provide all of the disclosure required under Item 101 and in a format that explains both the history of the Company and the current state of the Company.
Answer:
The Company has substantially revised its description of business in the Form 10 (A), Amendment No. 3, to provide disclosure required under Item 101, and in a format that explains the history and current state of the Company.
Risk Factors, page
4.
Please include any disclosure that would be required under Item 101 of Regulation S-K in your description of business section. This section should highlight risks and not be the location of initial Item 101 disclosure.
Answer:
We believe we have revised the risk factors in the Form 10 (A) Amendment No. 3, according to your request.
5.
We note your response to our prior comment 10 and note that you use a variety of heading formats for each of your risk factors. Please revise your headings so that each heading includes the actual risk that will be described in the following paragraph. We note that some of your headings, such as your heading, “The Management of the Exploration Activity at SJG is shared with Goldgroup, as described in the Earn In / Option Agreement. There exists a potential for conflicts over the plan of exploration and execution” are in the proper format, while others, such as your heading, “Competitive Business Conditions” do not include the actual risk associated with such conditions.
Answer:
The Company has revised its headings in the Form 10 (A), Amendment No. 3, “Risk Factors”, in accordance with your request, so that the actual risk is stated and included prior to the risk being described in the following paragraph.
Page 2 of
6.
Please group your risk factors into categories. For example all risk factors dealing with your properties and your industry should be grouped together, while all risk factors dealing with the structure of the Company should follow each other.
Answer:
The Company has reorganized and grouped the risk factors into categories, in its Form 10 (A), Amendment No. 3.
7.
Please clarify and reconcile the risk factor on page 13 titled, “The Company operates in an industry where there are significant environmental and regulatory requirements” with the risk factor on page 9 titled “Government Regulations”. Further, please explain the need for both risk factors.
Answer:
The risk factors you identify have been consolidated in to one risk factor, in the Company’s Form 10 (A), Amendment No. 3.
Security Ownership of Certain Beneficial Owners and Management, Page 30
8.
We note your response to our prior comment 14. Please note that Item 403 requires disclosure for any class of the registrant’s voting securities. Please include disclosure here regarding your Preferred A Shares.
Answer:
Additional disclosure for the Preferred A Shares is included in the Company’s Form 10 (A), Amendment No. 3.
Executive Compensation, page
9.
We note your explanatory footnote for the All other compensation column. Please expand this footnote to explain why Dynacap is providing the Company with funds. Further, if this is the case, please include a discussion of such funding in your Certain Relationships and Related Transactions section. Finally, file any and all agreements relating to such funding as exhibits to your Form 10.
Answer:
In accordance with your request, we have removed the compensation and the footnote since the funds were paid by Dynacap to its officers, and not paid by the Company. For further explanation, Dynacap does not provide funds for the Company; rather Dynacap has received funds from the company pursuant to a consulting agreement, and subsequently Dynacap has paid amounts to its officers.
Page 3 of
Certain Relations and Related Transactions, page 34
10.
We note that under the Consulting Agreement with Dynacap, the Company pays a total base compensation of $10,000 a month, yet for 2007, the Company paid Dynacap $182,738. Provide disclosure regarding the actual amount over the annual base compensation. Further, if this amount is the “bonus” referred to in Section 5.B. or 5.C. of the Consulting Agreement, provide detailed disclosure explaining how such a bonus was determined, especially given the fact that Dynacap and the Company appear to be controlled by the same persons. Further, include a risk factor that states that the Company has a Consulting Agreement with a related party that does not have a capped amount that could be paid out by the Company and that in recent years you have paid out amounts in excess of the total base compensation.
Answer:
In June 2005, The Company formed DynaResource Operaciones SA de CV., a third operating subsidiary company in Mexico, which subsidiary is responsible for the retaining, registering, and managing personnel and consultants necessary for carrying out activities at the San Jose de Gracia Property. Since June 2005, the Company has paid to Dynacap the base compensation of $ 15,000 Month; or, the sum of $ 5,000. / Month, per subsidiary.
Further, the Company has included a risk factor in its Form 10 (A), Amendment No. 3, which states that the company maintains a Consulting Agreement with a related party (Dynacap) that does not have a capped amount, and in recent years the Company has paid out amounts in excess of the total base compensation.
Exhibits, page
11.
We note out prior comment 25 and reissue said comment in part. The current exhibit still does not contain an effective date.
Answer:
Exhibit 99.1 has been re-filed, with its effective date.
Consolidated Statement of Operations, Page F-3
12.
We note your presentation of diluted weighted average of outstanding shares and loss per share. It appears your computation includes conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share. Please amend your financial reports on an annual and interim basis to comply with paragraph 13 of SFAS No. 128.
Answer:
The Company has amended their presentation of Earnings (Loss) per Share in accordance with paragraph 13 of SFAS No. 128. As the Company incurred a loss during the periods presented, basic and fully diluted earnings per share are now the same, as the exercise of stock options would be considered to be anti-dilutive to the loss per common share.
Page 4 of
Note 1 - Nature of Activities and Significant Accounting Policies
Earnings (Loss) per Common Share, page F-9
13.
Please expand your footnote to provide all the disclosure required by paragraph 40 of SFAS 128. Specifically, please provide disclosure regarding securities that could potentially dilute Basic EPS and disclose the conversion of securities that have an anti-dilutive effect on earnings per share pursuant to paragraph 40.c of SFAS 128.
Answer:
The Company has expanded the Earnings (Loss) per share footnote as required by paragraph 40 of SFAS 128. As basic and diluted Earnings (Loss) per share are the same (as discussed in point #12 above), a re-conciliation was not deemed necessary.
Additionally, information has been provided in the footnote regarding securities that could potentially dilute basic EPS in the future, as well as on the conversion of the securities that would have an anti-dilutive effective on EPS.
Interim Financial Statements as of and for the Period Ended September 30, 2008
Consolidated Balance Sheets, page F-21
14.
We note your minority interest balance of ($321,933) as of September 30, 2008. Please tell us if your minority shareholders have a binding obligation to provide additional funding for their share or make good on their losses that exceed their interest in the equity of DynaMexico. If not, please amend your balance sheet to comply with paragraph 15 of ARB No. 51 or tell us why your presentation is appropriate under U.S. GAAP.
Answer:
The Company’s minority shareholders have subsequently contributed additional capital to fund the minority interest losses, and therefore, we believe the current presentation is appropriate. The minority shareholder contributions in 2009 are included in the supplemental schedule attached in answer to comment 15.
Note 5 – Material Agreements, page F-29
15.
We note in August 2008 that an additional 10% of the shares of DynaMexico were transferred to Goldgroup, so that Goldgroup now owns 25% of DynaMexico. Tell us how their 25% ownership is reflected in your minority interest as of September, 30 2008. Further, tell us how your minority interest was calculated for the fiscal year ended December 31, 2007. In this respect, please clarify the amount of equity capital of DynaMexico as of December 31, 2007 and as of the end of each quarter in 2008.
Answer:
Page 5 of
In 2007, Goldgroup made the final contribution to earn the 15% interest in late December, so none of the loss for 2007 was allocated to Goldgroup (which would have reduced the minority interest). For better understanding, and as supplemental information; we have attached two schedules: (1) showing the minority interest calculation for 2008, and (2) a schedule showing the capital contributions of Goldgroup for the year 2008, and including capital contributions in 2009.
Please let me know if you have further questions, or if you need any further clarification on the answers provided. Thank you for your professional attention.
Respectfully,
/s/ K.W. (“K.D.”)
Diepholz
Show Raw Text
CORRESP
1
filename1.htm
dynrcorresp.htm
DynaResource,
Inc.
The
Urban Towers
222
W. Las Colinas Blvd.; Suite 744 East Tower
Irving,
Texas 75039
(972)
868-9066 / Fax: (972) 868-9067
MAY
5, 2009
Mr. Roger
Schwall
Mr. John
Madison
Mr.
Michael Karney
Mr. Bob
Carroll
Mr. Chris
White
U.S.
Securities & Exchange Commission
Division
of Corporate Finance
100 F
Street NE
Washington,
DC 20549
RE:
DynaResource,
Inc.
Form
10 / A; Amendment No. 3; File No.
0-53237
Dear Mr.
Schwall, Mr. Madison, Mr. Karney, Mr. Carroll and Mr. White:
We
received your letter dated March 25, 2009 with comments to the filed Form 10,
Amendment No. 1, for DynaResource, Inc., File No. 0-53237. We
have restated your comments below and have included our responses to each
comment. And, where applicable, we are including comments in the
revised Form 10 / Amendment No. 2
General
1.
We
note that your registration statement was automatically effective by
operation of law on July 14, 2008; however, you have yet to clear all of
our comments. Please bear in mind that you are now a reporting company
under the Exchange Act of 1934 and must continue to file all reports
required by such Act.
Answer:
The
Company is current with all reports required under the Exchange Act of 1934.
2.
We
note your Form 10/A includes financial statement5s through September 30,
2008. Please amend your Form 10/A to only include financial statements
that are required as of your automatic effective date, specifically
audited financial statements for your fiscal year ended 2007 and 2006 and
unaudited financials through March 31, 2008. Please also amend
your financial statements and related disclosure on Form 10-Q for the
periods ended June 30, 2008 and September 30, 2008 to reflect our
comments.
Page 1 of
6
Answer:
The
Company has amended its Form 10 (A), Amendment No. 3, to include financial
statements required as of the automatic effective date, July 14,
2008. Additionally, the Form 10-Q’s for June 30, 2008 and September
30, 2008 will be amended to reflect your comments, if necessary.
Description of Business,
page 2
3.
We
note your responses to our prior comments 4 and 5. Your description of
business should contain all of the disclosures required under Item 101 of
Regulation S-K. In that regard, we note that you have omitted much of the
history of share issuances. Further, we note that the history of the
Company does not follow a chronological pattern and therefore makes it
difficult to follow. Please substantially revise your description of
business to provide all of the disclosure required under Item 101 and in a
format that explains both the history of the Company and the current state
of the Company.
Answer:
The
Company has substantially revised its description of business in the Form 10
(A), Amendment No. 3, to provide disclosure required under Item 101,
and in a format that explains the history and current state of the
Company.
Risk Factors, page
9
4.
Please
include any disclosure that would be required under Item 101 of Regulation
S-K in your description of business section. This section should highlight
risks and not be the location of initial Item 101
disclosure.
Answer:
We
believe we have revised the risk factors in the Form 10 (A) Amendment No. 3,
according to your request.
5.
We
note your response to our prior comment 10 and note that you use a variety
of heading formats for each of your risk factors. Please revise your
headings so that each heading includes the actual risk that will be
described in the following paragraph. We note that some of your headings,
such as your heading, “The Management of the Exploration Activity at SJG
is shared with Goldgroup, as described in the Earn In / Option Agreement.
There exists a potential for conflicts over the plan of exploration and
execution” are in the proper format, while others, such as your heading,
“Competitive Business Conditions” do not include the actual risk
associated with such conditions.
Answer:
The
Company has revised its headings in the Form 10 (A), Amendment No. 3, “Risk
Factors”, in accordance with your request, so that the actual risk is stated and
included prior to the risk being described in the following
paragraph.
Page 2 of
6
6.
Please
group your risk factors into categories. For example all risk
factors dealing with your properties and your industry should be grouped
together, while all risk factors dealing with the structure of the Company
should follow each other.
Answer:
The
Company has reorganized and grouped the risk factors into categories, in its
Form 10 (A), Amendment No. 3.
7.
Please
clarify and reconcile the risk factor on page 13 titled, “The Company
operates in an industry where there are significant environmental and
regulatory requirements” with the risk factor on page 9 titled “Government
Regulations”. Further, please explain the need for both risk
factors.
Answer:
The
risk factors you identify have been consolidated in to one risk factor, in the
Company’s Form 10 (A), Amendment No. 3.
Security Ownership of
Certain Beneficial Owners and Management, Page 30
8.
We
note your response to our prior comment 14. Please note that Item 403
requires disclosure for any class of the registrant’s voting securities.
Please include disclosure here regarding your Preferred A
Shares.
Answer:
Additional
disclosure for the Preferred A Shares is included in the Company’s Form 10 (A),
Amendment No. 3.
Executive Compensation, page
33
9.
We
note your explanatory footnote for the All other compensation column.
Please expand this footnote to explain why Dynacap is providing the
Company with funds. Further, if this is the case, please include a
discussion of such funding in your Certain Relationships and Related
Transactions section. Finally, file any and all agreements relating to
such funding as exhibits to your Form
10.
Answer:
In
accordance with your request, we have removed the compensation and the footnote
since the funds were paid by Dynacap to its officers, and not paid by the
Company. For further explanation, Dynacap does not provide
funds for the Company; rather Dynacap has received funds from the company
pursuant to a consulting agreement, and subsequently Dynacap has paid amounts to
its officers.
Page 3 of
6
Certain Relations and
Related Transactions, page 34
10.
We
note that under the Consulting Agreement with Dynacap, the Company pays a
total base compensation of $10,000 a month, yet for 2007, the Company paid
Dynacap $182,738. Provide disclosure regarding the actual amount over the
annual base compensation. Further, if this amount is the “bonus” referred
to in Section 5.B. or 5.C. of the Consulting Agreement, provide detailed
disclosure explaining how such a bonus was determined, especially given
the fact that Dynacap and the Company appear to be controlled by the same
persons. Further, include a risk factor that states that the Company has a
Consulting Agreement with a related party that does not have a capped
amount that could be paid out by the Company and that in recent years you
have paid out amounts in excess of the total base
compensation.
Answer:
In
June 2005, The Company formed DynaResource Operaciones SA de CV., a third
operating subsidiary company in Mexico, which subsidiary is responsible for the
retaining, registering, and managing personnel and consultants necessary for
carrying out activities at the San Jose de Gracia Property. Since June
2005, the Company has paid to Dynacap the base compensation of $ 15,000
Month; or, the sum of $ 5,000. / Month, per subsidiary.
Further,
the Company has included a risk factor in its Form 10 (A), Amendment No. 3,
which states that the company maintains a Consulting Agreement with a related
party (Dynacap) that does not have a capped amount, and in recent
years the Company has paid out amounts in excess of the total base
compensation.
Exhibits, page
24
11.
We
note out prior comment 25 and reissue said comment in part. The current
exhibit still does not contain an effective
date.
Answer:
Exhibit 99.1 has been re-filed, with
its effective date.
Consolidated Statement of
Operations, Page F-3
12.
We
note your presentation of diluted weighted average of outstanding shares
and loss per share. It appears your computation includes conversion,
exercise, or contingent issuance of securities that would have an
anti-dilutive effect on earnings per share. Please amend your financial
reports on an annual and interim basis to comply with paragraph 13 of SFAS
No. 128.
Answer:
The
Company has amended their presentation of Earnings (Loss) per Share in
accordance with paragraph 13 of SFAS No. 128. As the Company
incurred a loss during the periods presented, basic and fully diluted earnings
per share are now the same, as the exercise of stock options would be considered
to be anti-dilutive to the loss per common share.
Page 4 of
6
Note 1 - Nature of
Activities and Significant Accounting Policies
Earnings (Loss) per Common
Share, page F-9
13.
Please
expand your footnote to provide all the disclosure required by paragraph
40 of SFAS 128. Specifically, please provide disclosure regarding
securities that could potentially dilute Basic EPS and disclose the
conversion of securities that have an anti-dilutive effect on earnings per
share pursuant to paragraph 40.c of SFAS
128.
Answer:
The
Company has expanded the Earnings (Loss) per share footnote as required by
paragraph 40 of SFAS 128. As basic and diluted Earnings (Loss) per share
are the same (as discussed in point #12 above), a re-conciliation was not deemed
necessary.
Additionally,
information has been provided in the footnote regarding securities that could
potentially dilute basic EPS in the future, as well as on the conversion of the
securities that would have an anti-dilutive effective on EPS.
Interim Financial Statements
as of and for the Period Ended September 30, 2008
Consolidated Balance Sheets,
page F-21
14.
We
note your minority interest balance of ($321,933) as of September 30,
2008. Please tell us if your minority shareholders have a binding
obligation to provide additional funding for their share or make good on
their losses that exceed their interest in the equity of DynaMexico. If
not, please amend your balance sheet to comply with paragraph 15 of ARB
No. 51 or tell us why your presentation is appropriate under U.S.
GAAP.
Answer:
The
Company’s minority shareholders have subsequently contributed additional capital
to fund the minority interest losses, and therefore, we believe the
current presentation is appropriate. The minority shareholder contributions in
2009 are included in the supplemental schedule attached in answer to comment
15.
Note 5 – Material
Agreements, page F-29
15.
We
note in August 2008 that an additional 10% of the shares of DynaMexico
were transferred to Goldgroup, so that Goldgroup now owns 25% of
DynaMexico. Tell us how their 25% ownership is reflected in your minority
interest as of September, 30 2008. Further, tell us how your
minority interest was calculated for the fiscal year ended December 31,
2007. In this respect, please clarify the amount of equity
capital of DynaMexico as of December 31, 2007 and as of the end of each
quarter in 2008.
Answer:
Page 5 of
6
In
2007, Goldgroup made the final contribution to earn the 15% interest in late
December, so none of the loss for 2007 was allocated to Goldgroup (which would
have reduced the minority interest). For better understanding, and as
supplemental information; we have attached two schedules: (1) showing the
minority interest calculation for 2008, and (2) a schedule showing the capital
contributions of Goldgroup for the year 2008, and including capital
contributions in 2009.
Please
let me know if you have further questions, or if you need any further
clarification on the answers provided. Thank you for your
professional attention.
Respectfully,
/s/ K.W. (“K.D.”)
Diepholz
K.W. (“K.D.”) Diepholz
Chairman
/ CEO
/s/ Charles E.
Smith
Charles
E. Smith
CFO
CC.:
Scheef
& Stone, LLP.
Mr.
Roger Crabb
Ms.
Sarah Benes
Page 6 of
6
DynaResource
de Mexico, S.A. de C.V.
Minority
Interest Calculation
December
31,
2008
DynaMexico
Pesos
%
used
US$
Equity
Loss
for 3 months ended March 31, 2008
10,091,799
15%
1,513,770
142,406
(2,040,024)
as
of Mar 31, 2008
Loss
for 3 months ended June 30, 2008
22,220,628
12,128,829
15%
1,819,324
177,405
(1,396,136)
as
of June 30, 2008
Loss
for 3 months ended September 30, 2008
42,026,073
19,805,445
15
days - 15%
484,372
347,104
(2,060,460)
as
of Sept 30, 2008
19,805,445
77
days - 25%
4,144,074
Loss
for 3 months ended December 31, 2008
61,704,011
19,677,938
25%
4,919,485
267,820
(4,135,406)
as
of Dec 31, 2008
Total
for 2008
81,509,456
12,881,025
934,735
Exchange
rate
13.78040
US$
934,735