<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended: June 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________________ to ___________________
Commission file number: 0-17385
DYNA GROUP INTERNATIONAL, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
NEVADA 87-0404753
_______________________________ _________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 W. 16th Street, Broadview, Illinois 60153
________________________________________ __________
(Address of principal executive offices) (Zip Code)
708 - 450-9200
____________________________________________________
(Registrant's telephone number, including area code)
Not applicable
___________________________________________________
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of
June 30, 1995 was 7,465,147.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
-------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 58,040 $ 305,610
Accounts receivable, less allowance
for doubtful accounts of $92,000 1,803,312 1,915,466
Inventories 3,101,352 2,379,669
Prepaid expenses and other 203,109 111,589
Deferred tax assets 71,660 71,660
----------- -----------
5,237,473 4,783,994
----------- -----------
PROPERTY AND EQUIPMENT, less
accumulated depreciation of
$1,795,059 and $1,661,778 1,141,897 1,060,108
----------- -----------
OTHER ASSETS:
Cost in excess of net assets of acquired
business, less accumulated amortization
of $91,023 and $81,084 44,729 54,668
Investment in joint venture 18,140 25,490
Due from joint venture 140,298 39,441
Other 90,929 76,085
----------- -----------
294,096 195,684
----------- -----------
$ 6,673,466 $ 6,039,786
=========== ===========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND June 30, December 31,
STOCKHOLDERS' EQUITY 1995 1994
- -------------------- -------- ---------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable bank $ 1,175,000 $ 740,000
Notes payable related party 450,000 500,000
Accounts payable 942,366 648,650
Accrued expenses 422,652 481,829
Current maturities of long-term debt 145,480 145,480
----------- -----------
3,135,498 2,515,959
----------- -----------
LONG-TERM DEBT BANK: 764,751 835,197
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock $.001 par value - authorized,
100,000,000 shares; issued 8,179,704 8,180 8,180
Capital in excess of par value 950,687 944,574
Retained earnings 1,988,069 1,859,135
Treasury stock - 714,557 and 684,057
shares, at cost (143,657) (100,196)
Unearned compensation (30,062) (23,063)
----------- -----------
2,773,217 2,688,630
----------- -----------
$ 6,673,466 $ 6,039,786
=========== ===========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
NET SALES $ 2,123,768 $ 2,494,288
COST OF SALES 1,096,405 1,248,132
----------- -----------
Gross profit 1,027,363 1,246,156
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 948,393 869,871
----------- -----------
Operating income 78,970 376,285
INTEREST EXPENSE 56,466 43,037
----------- -----------
LOSS FROM JOINT VENTURE -- --
----------- -----------
Income before income
taxes 22,504 333,248
PROVISION FOR INCOME TAXES 8,552 129,975
----------- -----------
NET INCOME $ 13,952 $ 203,273
=========== ===========
INCOME PER COMMON SHARE $ -- $ .03
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,466,480 7,513,647
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
NET SALES $ 4,164,207 $ 4,500,979
COST OF SALES 2,125,703 2,370,695
----------- -----------
Gross profit 2,038,504 2,130,284
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,722,522 1,603,429
----------- -----------
Operating income 315,982 526,855
INTEREST EXPENSE 100,672 81,094
----------- -----------
LOSS FROM JOINT VENTURE (7,350) --
----------- -----------
Income before income
taxes 207,960 445,761
PROVISION FOR INCOME TAXES 79,025 172,955
----------- -----------
NET INCOME $ 128,935 $ 272,806
=========== ===========
INCOME PER COMMON SHARE $ .02 $ .04
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,485,022 7,457,647
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 128,935 $ 272,806
Adjustments to reconcile income from
operations to net cash used
by operating activities -
Depreciation and amortization 143,220 139,654
Provision for losses on accounts receivable -- 21,022
Amortization of unearned compensation 7,063 5,761
Other -- 21,111
Loss from joint venture 7,350 --
Change in assets and liabilities:
Decrease in accounts receivable 112,154 397,995
Increase in inventories (721,683) (441,514)
Decrease (increase) in prepaid expenses and other (91,520) 41,723
(Decrease) increase in accounts payable 293,716 203,122
(Decrease) increase in accrued expenses (59,177) 68,744
Decrease (increase) in other assets (55,701) (6,860)
--------- ---------
Cash provided (used) by operating activities (235,643) 723,564
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (215,070) (164,140)
--------- ---------
Cash used by investing activities (215,070) (164,140)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (70,446) (21,120)
Increase (decrease) in notes payable 385,000 (556,000)
Advance to joint venture (60,000) --
Repurchase common stock (51,411) --
--------- ---------
Cash provided (used) by financing activities 203,143 (577,120)
--------- ---------
DECREASE IN CASH (247,570) (17,696)
CASH, beginning of period 305,610 290,870
--------- ---------
CASH, end of period $ 58,040 $ 273,174
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 93,083 $ 64,983
Income Taxes 90,273 41,894
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - FINANCIAL INFORMATION
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to or as permitted by such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
The financial information included herein at June 30, 1995 and for the
three months and six months ended June 30, 1995 and June 30, 1994 is unaudited
and, in the opinion of the Company, reflects all adjustments (which includes
only normal recurring adjustments) necessary for the fair presentation of
financial position as of that date and the results of operations for those
periods. The information in the consolidated balance sheet as of December 31,
1994 was derived from the Company's audited financial statements for 1994.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Raw materials and work in process $ 1,337,371 $ 839,827
Finished goods 1,763,981 1,539,842
----------- -----------
$ 3,101,352 $ 2,379,669
=========== ===========
</TABLE>
NOTE 3 - NOTES PAYABLE TO BANKS
The Company has an agreement with a bank that provides for maximum
aggregate borrowing of $2,750,000 on qualified accounts receivable and
inventories as defined. This debt is represented by a revolving credit note
with a due date of June 30, 1995, and with interest payable at prime plus 3/4
percent (9 3/4% at June 30, 1995). The note is collateralized by accounts
receivable and inventory. At June 30, 1995 the Company had approximately
$152,000 available for borrowing and was in compliance with all of its bank
covenants. The Company has renewed this agreement with interest payable at
prime plus 1/2%, with a due date of June 30, 1996.
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - NOTE PAYABLE TO RELATED PARTY
In December 1994, the Company borrowed $560,000 from a bank to repay the
long-term debt due to the major stockholder. Concurrently, the major
stockholder loaned the Company $500,000 as evidenced by a promissory note due
December 14, 1995 with interest at prime plus 1/2 percent (9.5% at June 30,
1995). The proceeds from this loan were used to reduce current indebtedness to
the bank.
NOTE 5 - INCOME TAXES
The provision for income taxes from operations for the three months and
six months ended June 30, 1995 and June 30, 1994 reflect the Company's
estimated effective income tax rate for the full year. These effective rates
differed from the federal statutory income tax rate primarily because of the
graduated federal income tax rate structure.
NOTE 6 - LONG-TERM DEBT
In September 1993, the Company borrowed $465,159, with interest at
7.74%, secured by land and building, and payable in monthly installments of
$5,580 for principal and interest, through September 17, 1998, at which time
the balance of the principal is due. The proceeds from this borrowing were
used to repay the previous 9% first mortgage loan. The balance due on this
debt is $405,767 at June 30, 1995.
In December 1994, the Company borrowed $560,000, secured by a personal
investment account of the major stockholder, and a second mortgage on the land
and building. This note is payable in monthly installments of $9,333 plus
interest at prime plus 1/2% (9.5% at June 30, 1995) through December 14, 1999.
The proceeds from this note were used to retire the long-term indebtedness of
$536,211 to the major stockholder. The outstanding balance on this debt was
$504,000 at June 30, 1995.
NOTE 7 - STOCKHOLDERS' EQUITY
During the first quarter of 1995, the Company repurchased 64,000 shares of
stock for its treasury at a cost of $51,411.
In May 1995, the Company issued 37,500 shares of treasury stock to
employees as a bonus. In connection with this transaction, the Company
recorded $14,063 in unearned compensation which is being amortized over three
years. Also in May, 1995 the Company redeemed 4,000 shares of stock at no
cost.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company's working capital ratio declined to approximately 1.7 to 1,
and net cash in bank decreased by $247,570.
Operating activities used $235,643. Income from operations and non-cash
adjustments provided $286,568. Changes in net working capital items and other
assets used $522,211. Net working capital decreased primarily as a result of
increases in inventory and prepaid expenses. These increases are the result of
new product introductions and in anticipation of future sale requirements.
This use of cash was in part offset by a moderate decrease in accounts
receivable and a large increase in accounts payable. Capital expenditures,
primarily dies and molds used $215,070. Financing activities provided
$203,143. Payments on long-term debt, the repurchase of common stock, and an
advance to our joint venture used $181,857, while an increase in notes payable
provided $385,000.
At June 30, 1995 the Company has a revolving line of credit with a bank
allowing borrowing up to $2,750,000 against qualified accounts receivable and
inventory. At June 30, 1995 approximately $152,000 was available for
borrowing. The Company has renewed this agreement with a due date of June 30,
1996.
As of June 30, 1995, there are no material commitments for future
capital expenditures, and management does not anticipate any major expenditures
in the foreseeable future. It is management's belief that the Company's
present facilities will be adequate to meet its current and future needs.
Results of Operations
Net sales for the three months ended June 30, 1995 as compared to the
three months ended June 30, 1994 decreased by $370,520 or 14.9%. This decrease
was due to a restructuring of the Company's sales representative force, a
change in some customer buying patterns, and some minor impact from the
baseball and hockey strikes. Gross margin percent decreased a nominal 1.7% as
a result of a change in sales mix.
Selling, general and administrative expenses increased by $78,522. This
increase was related to introducing new products and improving product
presentation. The Company is continuing its emphasis on cost control and views
these increased expenditures as an investment for future growth.
Interest expense increased by $13,952 as a result of rate increases and
higher borrowing levels.
The Company's joint venture operation showed no gain or loss in the
quarter ended June 30, 1995.
The above discussed factors resulted in an after tax profit from
operations of $13,952 for the quarter ended June 30, 1995 as compared to
$203,273 for the quarter ended June 30, 1994.
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For the six months ended June 30, 1995 as compared to the six months
ended June 30, 1994 sales decreased by $336,772 or 7.5%. This decrease was a
result of a restructuring of the sales representative force, a change in some
customer buying patterns, and some minor impact from the baseball and hockey
strikes. Gross margin percent improved 1.6% as a result of a change in sales
mix.
Selling, general and administrative expenses for the six months ended
June 30, 1995 increased by $119,093. This increase was related to the
introduction of new products, improving product presentation, and added
personnel. The Company is continuing its emphasis on cost control, and views
these increased expenditures as necessary for future growth and to better
service the Company's customer base.
The Company's joint venture showed a nominal loss for the six months
ended June 30, 1995. The Company anticipates as the volume of work done by the
joint venture increases, it will become profitable, and cost savings will be
realized.
Interest expense for the six months ended June 30, 1995 increased by
$19,588 over the similar period in 1994, primarily as a result of rate
increases and higher borrowing levels.
The above discussed factors resulted in an after tax profit from
operations of $128,935 for the six months ended June 30, 1995 as compared to
$272,806 for the six months ended June 30, 1994.
The income tax provisions for the three and six months ended June 30,
1995 and June 30, 1994 were based on the Company's estimate of the tax for the
full year.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the stockholders was held on July 13, 1995.
(b) Three directors were elected and received the following votes for,
against or withheld:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
1. Roger R. Tuttle 7,043,110 30,600
2. William M. Sandstrom 7,042,710 31,000
3. Jeffrey L. Smith 7,043,110 30,600
</TABLE>
Item 5. Other Information
Mr. William Sandstrom has tendered his resignation as Treasurer and
Principal Accounting and Financial Officer effective July 31, 1995. Mr.
Sandstrom will continue to serve on the Board of Directors as an outside
director.
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SIGNATURES
Pursuant to 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.
DYNA GROUP INTERNATIONAL, INC.
(Registrant) --------------------------------------------
Date: July 27, 1995 /s/ Roger R. Tuttle
--------------------------------------------
(Signature) Roger R. Tuttle, Chairman of the Board
and Chief Executive Officer
Date: July 27, 1995 /s/ William M. Sandstrom
--------------------------------------------
(Signature) William M. Sandstrom, Treasurer (Principal
Accounting and
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 58,040
<SECURITIES> 0
<RECEIVABLES> 1,895,312
<ALLOWANCES> 92,000
<INVENTORY> 3,101,352
<CURRENT-ASSETS> 5,237,473
<PP&E> 2,936,956
<DEPRECIATION> 1,795,059
<TOTAL-ASSETS> 6,673,466
<CURRENT-LIABILITIES> 3,135,498
<BONDS> 764,751
<COMMON> 8,180
0
0
<OTHER-SE> 2,765,037
<TOTAL-LIABILITY-AND-EQUITY> 6,673,466
<SALES> 4,164,207
<TOTAL-REVENUES> 4,164,207
<CGS> 2,125,703
<TOTAL-COSTS> 2,125,703
<OTHER-EXPENSES> 1,729,872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,672
<INCOME-PRETAX> 207,960
<INCOME-TAX> 79,025
<INCOME-CONTINUING> 128,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,935
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
