<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934. (Fee required).
For the fiscal year ended: December 31, 1995
------------------------------------
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. (No fee required).
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 West 16th Street, Broadview, Illinois 60153
------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 450-9200
----------------------
Securities registered pursuant to Section 12(b) of the Act: None
----------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value per share
---------------------------------------
(Title of Class)
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.
Yes x No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sect. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this form
10-K(X).
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 1, 1996 was $3,145,643.
The number of shares outstanding of the registrant's common stock as of
March 1, 1996 was 7,465,147.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE> 2
Page 2
Part I
Item 1. Business
General
Dyna Group International, Inc. (the "Company") is a Nevada corporation and
conducts all of its business through its wholly-owned subsidiary, Great
American Products, Inc. ("Great American"). The Company was an inactive
publicly held corporation (formerly Red Creek Investments, Inc.) until August
22, 1986 when the Company acquired all of the outstanding stock of Dyna Tour
Corporation ("Dyna Tour") and simultaneously changed its name to Dyna Group
International, Inc. The Company acquired Great American on December 15, 1986,
XLM, Inc., ("XL") on January 1, 1987 and Great American Marketing Services
Corporation, ("American Marketing") on November 1, 1989.
In September, 1989, the Company decided to discontinue the operations of
its Dyna Tour subsidiary.
In September, 1992, the Company decided to discontinue the operations of
its Wholly owned subsidiary American Marketing.
In December, 1992, the Company received notice from General Tire, Inc. of
their intention to discontinue the distributorship of the Company's wholly
owned subsidiary XL. In February, 1993 the Company entered into an agreement
with General Tire, Inc, and Hibdon Tire Centers, Inc. for the purchase of its
tire inventory and backlog of orders for cost plus $500,000. See "Notes to
Consolidated Financial Statements."
In August 1994, the Company entered into a joint venture agreement with
Mexican individuals for the painting and marketing of its products.
In January 1995, the Company leased a manufacturing/warehousing facility
in Columbia, Missouri for the assembly and shipping of its glassware and
ceramic products.
The Company, through its Great American subsidiary, is engaged in the
business of manufacturing consumer products for sale to the retail giftware
market and the corporate premium and incentive market. Great American produces
and sells cast products, pewter enhanced glassware and wall and desk decor.
Products and Sales
The Company designs, manufactures and markets lines of consumer products,
as well as products for industry used as advertising specialties and premiums,
utilizing pewter and white metal alloys centrifugally cast in rubber molds.
These products include belt buckles, model miniatures, key chains, picture
frames, as well as, pewter decorated glassware, caps, ceramic ware, pewter
decorated wall and desk decor, and beginning in 1995 pewter enhanced keepsake
boxes. The Company believes this new product line will afford opportunities
for sales expansion in new markets as well as with existing customers. All of
the Company's centrifugally cast products are designed and manufactured at the
Company's Broadview, Illinois facility, with the pewter enhanced glass and
ceramic ware assembled in the Columbia, Missouri facility and a significant
portion of the painting was performed at the joint venture facility in Mexico.
This centrifugal casting business, which was commenced by a predecessor of
Great American in 1973, has resulted in the design and manufacture of corporate
and brand identity products for over 5,000 companies.
<PAGE> 3
Page 3
Products and Sales, continued
In 1991, the Company acquired certain assets of Sports Magnets, Inc.,
including license agreements to market a popular line of consumer magnets which
bear the logos of the National Football League, Major League Baseball, the
National Hockey League and the National Basketball Association. The Company's
Great American subsidiary has also obtained license agreements with the
National Football League, Major League Baseball, the National Hockey League and
the National Basketball Association, Rock Groups, various Universities,
Fraternities and Sororities. The Company is continuing its efforts to expand
its license agreements in other areas, as it is management's belief that
licensed products will enhance the Company's image and present new
opportunities for market expansion. As the license agreements must be
periodically renewed it is management's belief that future extensions will
continue to allow the Company to market licensed products, and management does
not anticipate any cancellations or non-renewals.
The raw materials used in the manufacture of the Company's centrifugally
cast products are obtained and are readily available from numerous sources.
The business of the Company is affected by seasonal factors due to the
varied product mix of the Company's sales. The Company does experience an
increase in inventory during the third quarter of the year followed by an
increase in accounts receivable during the fourth quarter. Management believes
the Company's inventory level and fluctuations in inventory are in line with
its sales and seasonal requirements.
Extension of credit terms provided by the Company to its customers range
from normal 30 day terms to 120 days from the date of invoice. Management
believes that while these longer credit terms do result in extended collection
periods, they also offer the Company an effective sales tool.
Marketing and Distribution
As of December 31, 1995, the Company's sales force and related support
staff numbered 15 persons. The Company also utilizes approximately 183
independent, commissioned sales representatives.
The Company's centrifugally cast products are sold through the Company's
own sales force, including sales made via telemarketing and direct sales,
through independent commissioned sales representatives and through
distributors. These cast products are also produced for sale to the
premium/advertising specialty industry, and are sold through independent
commissioned sales representatives and invoiced directly to the end users for
purposes of sales promotions and incentives.
The Company advertises in trade and industry publications, including
retail trade publications and incentive marketing publications. Advertising
also consists of point of purchase displays for the centrifugally cast
products.
<PAGE> 4
Page 4
Foreign Operations and Export Sales
The Company from its U.S. facilities markets its products internationally.
International sales accounted for 7%, 11% and 13% of total sales for the years
ended 1995, 1994 and 1993. In 1995 European sales comprised 74% of
international sales, while Asia comprised 6% with the balance sold elsewhere.
In 1994 the composition of the international markets was Europe 75%, Asia 11%
and the balance sold elsewhere. 1993 international sales composition was
Europe 61%, Asia 21% and the balance sold elsewhere.
In August 1994, the Company entered into a joint venture agreement with
Mexican individuals for the painting and marketing of its products. The
Company believes this will further reduce costs and open new markets in the
Spanish speaking countries. The Company's ownership interest in the joint
venture is 45%, with 50% held by the Mexican individuals and 5% held by a U. S.
individual.
Major Customers
The Company has over 5,000 customers. One major customer accounted for
22% of sales in 1995, 20% of sales in 1994, and 16% in 1993.
Competition
Operations in the consumer goods industry involve the production and sale
of cast products, and pewter enhanced glassware. The Company believes that it
is a significant factor in the market for cast products based upon Dun and
Bradstreet, Inc. reports, and that it currently is not a significant factor in
the overall market for glassware. The Company competes in the consumer goods
industry primarily on the basis of quality workmanship and competitive pricing.
Operations in the broad based corporate premium and ad specialty industry
for cast products include the sale of corporate products by the Company's sales
force and independent representatives. The Company believes that its premium
division ranks among the top ten producers of similar products, as estimated by
its representatives.
The Company actively competes with many companies which are substantially
larger, have more extensive product lines, wider distribution and greater
financial resources.
Employees
The Company employs up to 237 people, of whom 25 are engaged in sales and
administration, 21 in creative and art and 191 in manufacturing and
warehousing.
In December, 1993 the Company was petitioned by its factory employees to
allow the Independent Ladies Garment Workers Union ("the Union") to represent
them in a collective bargaining agreement. The Company and the Union signed a
three year collective bargaining agreement on June 24, 1994. The Company has
experienced no adverse effects from this agreement.
<PAGE> 5
Page 5
Equipment
The Company's Broadview, Illinois facility is equipped for manufacturing
and packaging of centrifugally cast pewter and white metal alloy consumer
products. All of the Company's equipment is considered to be in good condition.
The Company's leased facility in Columbia, Missouri is equipped for the
assembly, packaging and shipping of the pewter enhanced glass and ceramic ware.
The Company's joint venture facility is equipped for painting its cast
products.
The Company also has one (1) vehicle lease which has a monthly rental of
$317.
Item 2. Property
The Company's executive office is located in a 31,000 square foot owned
facility at 1801 W. 16th Street, Broadview, IL 60153. Most of the Company's
centrifugally cast products were designed and manufactured at this facility in
1995. In 1996 increasing levels of the manufacturing process are expected to
be done by our joint venture partner in Mexico.
In January 1995, the Company leased a manufacturing/warehousing facility
in Columbia, Missouri for assembly and shipping of its glassware and ceramic
products. The terms of this lease are summarized below.
<TABLE>
<CAPTION>
Approximate area Lease Monthly
Type of Facility in square feet Expiration Rental
- ---------------- ---------------- ---------- -------
<S> <C> <C> <C>
Manufacturing/Warehouse 20,000 12/31/96 $2,500
</TABLE>
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
Market Information
The Company's Common Stock trades on The NASDAQ Small-Cap Market under the
symbol DGIX. The following table sets forth for the periods indicated the high
and low bid quotations for the Company's Common Stock. The quotations
represent prices in the over-the-counter market between dealers in securities,
do not include retail markup, markdown or commissions. Prices were determined
based on actual transactions.
<PAGE> 6
Page 6
Market Information, continued
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
<S> <C> <C> <C>
1995 4th Quarter $ 1-7/16 $ 13/16
3rd Quarter 1 11/16
2nd Quarter 15/16 11/16
1st Quarter 1 5/8
1994 4th Quarter $ 1-3/32 $ 11/16
3rd Quarter 1-1/8 13/16
2nd Quarter 15/16 21/32
1st Quarter 1-5/16 7/8
</TABLE>
Holders
<TABLE>
<CAPTION>
Approximate number of holders
Title of Class of record as of March 1, 1996
-------------- -----------------------------
<S> <C>
Common stock, par value
$.001 per share 417
</TABLE>
Dividends
There have been no dividends paid on the Company's Common Stock since
inception. It is currently expected that any additional earnings the Company
realizes will be retained to finance growth.
Item 6. Selected Financial Data
The selected consolidated financial data presented below have been derived
from the Company's consolidated financial statements. The consolidated
financial statements for all years presented have been audited by the Company's
independent auditors, whose reports on such consolidated financial statements
for the three years ended December 31, 1995, 1994, and 1993 are included herein
under Item 14. The information set forth below should be read in conjunction
with the consolidated financial statements and notes thereto under Item 14 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $10,045 $10,025 $10,703 $8,615 $5,161
Income (loss) from continuing
operations 204 564 359 261 (7)
Income (loss) from continuing
operations per common share .03 .08 .05 .04 ---
Total assets at end of year 7,774 6,040 5,961 6,112 5,087
Long-term debt, less current
maturities, at end of year 686 835 923 978 937
</TABLE>
See "Notes to Consolidated Financial Statements" regarding business
combinations during the periods and discontinued operations.
<PAGE> 7
Page 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Set forth below is a discussion and analysis of the financial condition
and operating results of the Company's continuing operations. This discussion
should be read in conjunction with the accompanying consolidated financial
statements and notes.
Liquidity and Capital Resources
The Company's liquidity position declined to a 1.5 to 1 current ratio.
Net cash in bank decreased by $148,603.
Operating activities from continuing operations used $1,178,082 of cash in
1995. Income from continuing operations and non-cash adjustments provided a
total increase in cash of $730,718. This was offset by a $1,930,493 decrease
in net working capital, while a decrease in other assets provided $21,693. Net
working capital declined as a result of a large increase in inventory. This
increase was due to factors both planned and unexpected. During 1995 the
Company added several new product lines necessitating a buildup of inventory
for these products. The addition of a warehouse in Columbia, Missouri as
well as increased production by the joint venture in Mexico also contributed to
the increased inventory levels. Finally, sales volumes in certain product
lines were less than anticipated, further increasing inventory. Accounts
receivable increased substantially due to allowing extended payment terms to
some large and valued customers.
Investing activities used $499,396, with capital expenditures, primarily
dies and molds, using $454,396 and an investment in a joint venture
using $45,000. Financing activities provided $1,528,875. During the period
the Company decreased long-term debt by $144,714, increased short term
borrowing $1,725,000 and purchased 68,000 shares of common stock for its
treasury for $51,411.
At December 31, 1995 the Company had a bank revolving line of credit,
allowing the Company to borrow up to $2,750,000 against qualified receivables
and inventory. At that date the Company had fully utilized its borrowing base.
This line of credit expires June 30, 1996. The Company anticipates renewing
this agreement.
As of December 31, 1995 there are no material commitments for future
capital expenditures, and management does not feel there will be any major
expenditures in the foreseeable future. It is management's belief that the
Company's present credit facilities will be adequate to meet its current and
future needs, as the Company has instituted programs to reduce inventory from
present levels via sales and reduced production levels and to reduce accounts
receivable with more intensive collection efforts.
<PAGE> 8
Page 8
Results of Operations
1995 versus 1994
Net sales for the year ended December 31, 1995 increased by $19,592 or
0.2% as compared to 1994. It should be noted that in 1995 foreign sales
declined from the 1994 level by $380,000, as a result of decreasing sales of
belt buckles in these markets. The Company is in the process of introducing
some of its new product lines to the foreign marketplace which it believes will
increase sales.
Domestic sales increased from 1994 levels by nearly $400,000 as a result of new
product introduction and increased sales to a major customer. Gross profit
margin as a percent of sales increased by 0.3% from 1994 to 1995.
Selling, general and administrative expenses as a percent of sales
increased from 36% in 1994 to 41% in 1995. Most of this increase was
associated with the cost of introducing several new product lines and upgrading
old lines. Specifically, catalog and packaging costs rose considerably in 1995
due to redesign costs.
Interest expense increased $69,113 over 1994 due to higher short term
borrowing levels prompted by the increased accounts receivable and inventory
volumes.
In August 1994, the Company entered into a joint venture agreement
allowing for the painting and casting of its products in Mexico. The Company
has a 45% ownership in this operation. In 1995, the Company's equity in the
earnings of the joint venture was $14,331.
For 1995 the Company's net income after taxes declined to $204,325 as
compared to 1994's net income of $564,075. The decline in earnings was due to
the increases in selling, general and administrative expenses and interest
expense as previously discussed.
1994 versus 1993
Net sales for the year ended December 31, 1994 decreased by $677,633 or
6.3% as compared to 1993. This decrease in net sales can be attributed to the
Company's refusal to give guaranteed sales to national retailers and some
impact from the baseball and hockey strikes.
Gross profit margin as a percent of sales increased by 2% from 1993 to
1994. This increase is a result of significant reductions in our manufacturing
costs, which were in part offset by an increase in our mold support area.
Further, our profit margin was adversely impacted by a change in sales mix
toward lower margin custom business. 79% of the Company's sales in 1994 were
to retailers as compared to 87% in 1993.
Selling, general and administrative expenses as a percent of sales
decreased from 38% in 1993 to 36% in 1994. During 1994 the Company reduced
cost wherever possible. It should be noted that certain categories of expense
vary directly with sales volume.
Interest expense increased nominally during 1994 as a result of increases
in the prime rate.
<PAGE> 9
Page 9
Results of Operations, 1994 versus 1993 continued
In August 1994, the Company entered into a joint venture agreement
allowing for the painting and marketing of its products in Mexico. The Company
has a 45% ownership in this operation. The first few months of operations
resulted in a loss for the Company of $19,510. It is management's belief that
as the volume of work done by the joint venture increases that this will become
profitable and cost saving will be realized by the Company.
The Company through its focus on cost control and cost reduction in all
areas had an after tax profit of $564,075 or 5.6% in 1994, as compared to an
after tax profit of $394,711 or 3.7% in 1993. This is a 43% improvement even
though sales decreased.
Inflation
The Company believes that inflation will have little or no effect on the
salability of its products and that the cost increases of its produced products
can be passed on to the consumer.
Item 8. Financial Statements and Supplementary Data
See financial statements set forth in Item 14 of this annual report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements of the type described in Item 304 of
Regulation S-K with the Company's accountants. Information with respect to a
change in accountants is described in the Company's Form 8-K dated August 29,
1995.
<PAGE> 10
Page 10
PART III
Item 10. Directors and Executive Officers of the Registrant
The executive officers and directors of the Company are listed in the
table below, and brief summaries of their business experience and certain other
information with respect to them are set forth thereafter:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Roger R. Tuttle 48 Chairman of the Board of Directors, and
Chief Executive Officer, President of
Great American
William M. Sandstrom 49 Director
Jeffrey L. Smith 39 Secretary, Vice President and General
Manager of Great American, and Director
Thomas J. Heslinga 50 Treasurer, Controller
</TABLE>
All directors of the Company serve in such capacity until the next annual
meeting of the Company's stockholders following their election and until their
successors have been elected and qualify. Subject to their contract rights as
to compensation, officers may be removed with or without cause, at any time, by
a majority of the Board of Directors.
Roger R. Tuttle, has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since August 1986. Mr. Tuttle served
as President of Great American from 1974 to September 1989. Mr. Tuttle has
also served as Vice President of XL from 1984 to 1993. In December 1991, Mr.
Tuttle resumed the President's position at Great American.
William M. Sandstrom had served as Treasurer of the Company since
September 1989 and Controller since 1988, until his resignation effective July
31, 1995. Prior to this, and since 1982, Mr. Sandstrom was Director of
Administration of Ashland Products Company, an injection molder of engineered
thermo plastics. Mr. Sandstrom was appointed as a Director in December 1991.
Jeffrey L. Smith has served as Vice President and General Manager of
Great American Products since October 1991. Prior to this and since 1985 Mr.
Smith served as the General Manager of Great American's retail division. Mr.
Smith was appointed Secretary and Director in October 1992.
Thomas J. Heslinga has served as Treasurer and Controller since August 1,
1995. Mr. Heslinga had assisted Mr. Sandstrom with year end financial projects
since 1992. Mr. Heslinga is a C.P.A. and has held Controllership positions
with several organizations during his career.
<PAGE> 11
Page 11
Item 11. Executive Compensation
Cash Compensation
The following table sets forth all cash compensation paid or accrued by
the Company for services rendered during the years ended December 31, 1995,
1994 and 1993 to each director and executive officer of the Company whose
aggregate cash compensation exceeded $100,000 and to all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
Other Annual Long Term
Name Year Salary Bonus Compensation Compensation
- ---- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Roger R. Tuttle 1995 $136,100 --- $3,750 -----
Chairman of the 1994 $131,600 $7000 --- -----
Board of Directors, 1993 $122,000 --- --- -----
and Chief Executive
Officer
</TABLE>
The Company provides certain executive officers and employees with fringe
benefits. These benefits, valued at their incremental cost, for any individual
do not exceed 10% of reported cash compensation for such individual.
Directors currently are not paid any fees for attendance at meetings of
the Board of Directors.
Compensation Pursuant to Plan
The Company has a Profit Sharing Trust for eligible employees. Employees
of the Company who have completed one year of service are eligible to
participate in the Trust under which the Company contributes amounts determined
from time to time at its discretion. Company contributions vest in specified
percentages per year commencing after 2 years and generally become fully vested
after 6 years of employment with the Company. The annual contributions and
forfeitures allotted to any participant may not exceed the lesser of $30,000 or
25% of the participant's total compensation. Benefits generally are payable
upon death or upon termination of employment with the Company or age 65.
Participants' account balances under the Trust as of the year ended December
31, 1995 for Messrs. Tuttle, Smith and for all executive officers as a group,
were $115,677, $8,779 and $127,280, respectively.
<PAGE> 12
Page 12
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The following table provides information as of March 6, 1996 for each
person who owned more than five (5%) percent of the Company's Common Stock
beneficially and by each director and each officer and all officers and
directors as a group:
<TABLE>
<CAPTION>
Name and Amount and
Title Address of Nature of Percent
of Class Beneficial Owner Beneficial Ownership of Class
-------- ---------------- -------------------- --------
Security Ownership of Management:
<S> <C> <C> <C> <C>
Common Stock Roger R. Tuttle (1) 3,340,000 44.74%
1801 W. 16th Street
Broadview, IL 60153
Common Stock All Directors and
Officers as a Group 3,420,000 45.81%
</TABLE>
(1) In December 1995, Mr. Tuttle gifted 8,000 shares each to his two
minor children, he retains guardianship and voting rights.
Item 13. Certain Relationships and Related Transactions
The Company has a note payable to the Chairman of the Board which is
summarized as follows:
Unsecured promissory note, due 12/14/96
both principal and interest payable to
the major stockholder, interest at
prime plus 1/2% (9% at December 31, 1995) $400,000
See "Notes to the Consolidated Financial Statements".
<PAGE> 13
Page 13
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a) 1. Financial Statements: Page
Dyna Group International, Inc.
Reports of Independent Public Accountants . . . . . . . . . . . 15
Consolidated Balance Sheet - December 31, 1995 and 1994. . . . . 17
Consolidated Statement of Income - for the years
ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . 19
Consolidated Statement of Stockholders' Equity - for the
years ended December 31, 1995, 1994 and 1993 . . . . . . . . . 20
Consolidated Statement of Cash Flows - for the years
ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . 21
Notes to Consolidated Financial Statements . . . . . . . . . . . 23
2. Financial Statement Schedules:
For the years ended December 31, 1995, 1994 and 1993 -
Schedule II - Valuation and Qualifying Accounts. . . . . . . 31
Schedules other than noted above have been omitted because they are
inapplicable or the information is contained elsewhere in the consolidated
financial statements.
3. Exhibits:
Reference is made to "Exhibit Index" beginning on page 32 herein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
<PAGE> 14
Page 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) 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)
By /S/ Roger R. Tuttle
------------------------------------------------------------------
Roger R. Tuttle, Chairman of the Board and Chief Executive Officer
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
By /S/ Roger R. Tuttle
------------------------------------------------------------------
Roger R. Tuttle, Chairman of the Board and Chief Executive Officer
By /S/ Thomas J. Heslinga
------------------------------------------------------------------
Thomas J. Heslinga, Treasurer (Principal Accounting and
Financial Officer)
By /S/ Jeffrey L. Smith
------------------------------------------------------------------
Jeffrey L. Smith, Secretary and Director
By /S/ William M. Sandstrom
------------------------------------------------------------------
William M. Sandstrom, Director
Date: March 28, 1996
<PAGE> 15
Page 15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
of Dyna Group International, Inc.
We have audited the accompanying consolidated balance sheet of Dyna Group
International, Inc. and Subsidiaries as of December 31, 1995 and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year ended December 31, 1995. We have also audited the schedule listed in the
accompanying index. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and schedule
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and schedule.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Dyna Group
International, Inc. and Subsidiaries at December 31, 1995, and the results of
their operations and their cash flows for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.
Also in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
/S/ BDO SEIDMAN, LLP
Chicago, Illinois
March 1, 1996
<PAGE> 16
Page 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Dyna Group International, Inc.
We have audited the accompanying consolidated balance sheet of Dyna Group
International, Inc. (a Nevada corporation) and Subsidiaries as of December 31,
1994, and the related consolidated statement of operations, stockholders'
equity and cash flows for each of the two years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as, evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Dyna Group
International, Inc. and Subsidiaries as of December 31, 1994, in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to financial statements is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the 1993 and 1994 audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the 1993
and 1994 financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 7, 1995
<PAGE> 17
Page 17
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
ASSETS ------------------------------
------
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 157,007 $ 305,610
Accounts receivable, less allowance
for doubtful accounts of $92,000 2,405,039 1,915,466
Inventories 3,667,195 2,379,669
Prepaid expenses and other 118,267 111,589
Deferred tax assets 61,372 71,660
------------ ------------
6,408,880 4,783,994
------------ ------------
PROPERTY AND EQUIPMENT, Net 1,137,353 1,060,108
------------ ------------
OTHER ASSETS:
Cost in excess of net assets of acquired
business, less accumulated
amortization of $100,963 and $81,084 34,789 54,668
Investment in joint venture 84,821 25,490
Due from joint venture ---- 39,441
Other 93,833 76,085
------------ ------------
213,443 195,684
------------ ------------
$ 7,759,676 $ 6,039,786
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 18
Page 18
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
LIABILITIES AND ------------------------------
---------------
STOCKHOLDERS' EQUITY 1995 1994
-------------------- ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to bank $ 2,565,000 $ 740,000
Note payable to related party 400,000 500,000
Accounts payable 642,026 648,650
Accrued expenses 458,423 481,829
Current maturities of long-term debt 150,311 145,480
------------ ------------
4,215,760 2,515,959
------------ ------------
LONG-TERM DEBT:
Bank less current maturities 685,652 835,197
------------- ------------
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 2,063,460 1,859,135
Treasury stock - 714,557 and
684,057 shares, at cost (143,657) (100,196)
Unearned compensation (20,406) (23,063)
------------ ------------
2,858,264 2,688,630
------------ ------------
$ 7,759,676 $ 6,039,786
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 19
Page 19
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $10,044,767 $10,025,175 $10,702,808
COST OF SALES 5,336,504 5,355,671 5,914,768
------------ ------------ ------------
Gross profit 4,708,263 4,669,504 4,788,040
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,133,607 3,561,429 4,072,441
------------ ------------ ------------
Operating income 574,656 1,108,075 715,599
INTEREST EXPENSE 244,846 175,733 170,619
EQUITY IN EARNINGS (LOSS) OF
JOINT VENTURE 14,331 (19,510) ----
------------ ------------ ------------
Income from continuing
operations before income taxes 344,141 912,832 544,980
PROVISION FOR INCOME TAXES 139,816 348,757 185,756
------------ ------------ ------------
Income from continuing
operations 204,325 564,075 359,224
------------ ------------ ------------
DISCONTINUED OPERATIONS:
Gain from disposal of
discontinued operations, net of
income taxes of $18,363 ---- ---- 35,487
----------- ------------ ------------
NET INCOME $ 204,325 $ 564,075 $ 394,711
=========== =========== ===========
INCOME PER COMMON SHARE:
Income from continuing operations $ .03 $ .08 $ .05
Net income $ .03 $ .08 $ .05
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,464,839 7,498,647 7,425,745
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 20
Page 20
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital in
Common excess of Retained Treasury Unearned
Stock par value Earnings Stock compensation Total
------ ---------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 $ 8,180 $ 900,403 $ 900,349 $ (98,831) $(37,372) $1,672,729
Issuance of treasury
stock ---- 19,485 ---- 2,823 ---- 22,308
Amortization ---- ---- ---- ---- 35,735 35,735
Net income ---- ---- 394,711 ---- ---- 394,711
------- --------- ---------- --------- -------- ----------
Balance at
December 31, 1993 $ 8,180 $ 919,888 $1,295,060 $ (96,008) $ (1,637) $2,125,483
Issuance of treasury
stock ---- 24,686 ---- 10,752 (35,438) ----
Purchase of treasury
stock ---- ---- ---- (14,940) ---- (14,940)
Amortization ---- ---- ---- ---- 14,012 14,012
Net income ---- ---- 564,075 ---- ---- 564,075
------- --------- ---------- --------- --------- ----------
Balance at
December 31, 1994 $ 8,180 $ 944,574 $1,859,135 $(100,196) $(23,063) $2,688,630
Issuance of treasury
stock ---- 6,113 ---- 7,950 (14,063) ----
Purchase of treasury
stock ---- ---- ---- (51,411) ---- (51,411)
Amortization ---- ---- ---- ---- 16,720 16,720
Net income ---- ---- 204,325 ---- ---- 204,325
------- --------- ---------- --------- --------- ----------
Balance at
December 31, 1995 $ 8,180 $ 950,687 $2,063,460 $(143,657) $(20,406) $2,858,264
======= ========= ========== ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Common Stock
----------------------
Share Amounts Issued Treasury
- ------------- --------- --------
<S> <C> <C>
Balance at December 31, 1992 8,179,704 751,039
Shares issued net of redemption ---- (982)
--------- ---------
Balance at December 31, 1993 8,179,704 750,057
Shares issued as compensation ---- (84,000)
Purchase of treasury stock ---- 18,000
--------- ---------
Balance at December 31, 1994 8,179,704 684,057
Shares issued as compensation ---- (37,500)
Shares purchased and redeemed ---- 68,000
---------- ---------
Balance at December 31, 1995 8,179,704 714,557
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 21
Page 21
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Income from continuing operations $ 204,325 $ 564,075 $ 359,224
Adjustments to reconcile income (loss) from
continuing operations to net cash
provided (used) by operating activities -
Depreciation and amortization 397,030 358,699 260,627
Provision for losses on accounts receivable 131,493 98,452 54,032
Amortization of unearned compensation 16,720 14,012 35,735
Other (4,519) 67,336 110,623
(Equity) loss in earnings of joint venture (14,331) 19,510 ----
Change in assets and liabilities:
Decrease (increase) in accounts receivable (621,066) 163,340 (564,327)
Increase in inventories (1,287,526) (285,538) (1,001,248)
Decrease (increase) in prepaid expenses
and other (6,678) (16,674) (52,600)
Increase (decrease) in accounts payable (6,624) 60,555 (86,861)
Decrease in accrued expenses (23,406) (21,797) (21,784)
Decrease (increase) in other assets 36,500 (45,912) (78,100)
----------- ----------- -----------
Cash provided (used) by continuing operations (1,178,082) (976,058) (984,679)
Cash provided (used) by discontinued operations ---- ---- 2,004,050
----------- ----------- -----------
Cash provided (used) by operating activities (1,178,082) 976,058 1,019,371
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (454,396) (328,545) (445,818)
Investment in joint venture (45,000) (45,000) ----
----------- ----------- -----------
Cash used by investing activities (499,396) (373,545) (445,818)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (144,714) (41,833) (146,319)
Increase (decrease) in notes payable 1,725,000 (531,000) (467,013)
Repurchase of common stock (51,411) (14,940) ----
----------- ----------- -----------
Cash (used) provided by financing activities 1,528,875 (587,773) (613,332)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH (148,603) 14,740 (39,779)
CASH, beginning of year 305,610 290,870 330,649
----------- ----------- -----------
CASH, end of year $ 157,007 $ 305,610 $ 290,870
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 22
Page 22
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Continued and discontinued operations -
Interest $ 231,880 $ 173,097 $ 183,073
Income Taxes 90,522 355,110 432,176
</TABLE>
Pursuant to an asset purchase agreement dated August 20, 1991, the
Company acquired selected assets of Sports Magnets, Inc.. In July, 1993,
21,450 shares of treasury stock were issued to satisfy a covenant of the asset
purchase agreement requiring a closing low bid price of $1.35 per share on
July 2, 1993. The actual low bid on July 2, 1993 was $1.04. The Company had
reserved for this prior to issuance.
During 1991, the Company issued 207,000 shares of treasury stock to
employees as a bonus. In connection with this transaction, the Company
recorded $64,688 in unearned compensation which was amortized over three
years. In May, 1993 20,468 shares of this stock issue was redeemed at no
cost.
During 1994, the Company issued 84,000 shares of treasury stock to
employees as a bonus. In connection with this transaction, the Company
recorded $35,438 in unearned compensation which is being amortized over
its vesting term of three years.
In December 1994, the Company repurchased 18,000 shares of stock for
its treasury at a cost of $14,940.
In the first quarter of 1995, the Company repurchased 64,000 shares
of stock for its treasury at a cost of $51,411.
In the second quarter of 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 the second quarter of 1995
the Company redeemed 4,000 shares of restricted stock through forfeiture.
See accompanying notes to consolidated financial statements.
<PAGE> 23
Page 23
DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Dyna Group International, Inc. (the "Company") is a Nevada
corporation and conducts all its business through its wholly owned
subsidiary, Great American Products, Inc.
The Company designs, manufactures and markets lines of consumer
products, as well as products for industry used as advertising specialties
and premiums, utilizing pewter and white metal alloys centrifugally cast in
rubber molds. These products include belt buckles, model miniatures, key
chains, picture frames, and pewter decorated products.
The products are designed and manufactured at the Company's
Broadview, Illinois facility. In addition, the Company has an assembly
operation located in Columbia, Missouri and an investment in a painting
operation in Mexico.
Principles of Consolidation
The consolidated financial statements include the accounts of
Dyna Group International, Inc. and its wholly-owned subsidiaries
("Company"). All significant intercompany balances and transactions are
eliminated.
As of February 26, 1993 the Company entered into agreements to
sell the tire inventory and open order backlog of its XLM, Inc. (XL)
subsidiary. Concurrently, the Company adopted a plan to discontinue
operations of XL (See Note 14).
Accordingly, the accompanying consolidated financial statements
reflect the net assets and results of operations of the aforementioned
subsidiary as discontinued operations.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Revenue Recognition
The Company recognizes revenue as products are shipped.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is
computed over the estimated useful lives of the assets using both
straight-line and accelerated methods. Depreciable lives of major classes
of property and equipment are summarized as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building 31.5
Building improvements 3 - 7
Machinery, equipment and furnishings 5 - 7
Transportation equipment 5
Molds and dies 3
</TABLE>
<PAGE> 24
Page 24
Cost in Excess of Net Assets of Acquired Business
Cost in excess of net assets of acquired business is being
amortized on a straight-line basis over five years.
Investment in Joint Venture
The investment is being accounted for using the equity method of
accounting.
Financial Instruments
The carrying value of cash, accounts receivable, accounts payable
and accrued expenses approximate the fair value because of the short
maturity of these items.
The carrying amounts of notes payable and long term debt
approximate fair value because the interest rates on these instruments
reflect current market interest rates.
Estimates
The accompanying financial statements include estimated amounts
and disclosures based on management's assumptions about future events.
Actual results may differ from these estimates.
Income Taxes
The provision for income taxes include federal and state income
taxes currently payable and those deferred because of temporary differences
between the financial statement and tax basis of assets and liabilities.
Income Per Common Share
Income per common share is computed by dividing net income by the
weighted average number of common shares outstanding.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Raw materials and work in process $1,131,045 $ 839,827
Finished goods 2,536,150 1,539,842
---------- ----------
$3,667,195 $2,379,669
========== ==========
</TABLE>
<PAGE> 25
Page 25
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Land $ 200,000 $ 200,000
Building 488,323 488,323
Building improvements 117,970 117,970
Machinery, equipment and furnishings 720,729 592,770
Molds and dies 1,649,260 1,322,823
---------- ----------
3,176,282 2,721,886
Less accumulated depreciation 2,038,929 1,661,778
---------- ----------
$1,137,353 $1,060,108
========== ==========
</TABLE>
NOTE 4 - NOTES PAYABLE TO BANK
The Company has an agreement with a bank that provides for maximum
aggregate borrowings 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, 1996, and with interest payable monthly at
prime plus 1/2 percent (9.0% at December 31, 1995). The note is
collateralized by the accounts receivable and inventories. For the year
ended December 31, 1995 the weighted average interest rate was 9.18%, the
maximum amount outstanding during the period was $2,565,000, and the average
amount outstanding during the period was $1,341,692. At December 31, 1995
the Company had fully utilized its borrowing base. Under the more
restrictive terms of the agreement, the Company must maintain a current
ratio of 1 to 1, and debt to equity ratio (as defined) of 3 to 1. To comply
with this debt to equity ratio stockholders' equity cannot be less than
approximately $1,634,000 at December 31, 1995. The Company was in
compliance with all of its bank covenants at December 31, 1995, with the
exception of the covenant regarding capital expenditures, which allows for
maximum capital expenditures of $100,000 in any one year for items other
than dies and molds. The Company exceeded this amount by $27,969. The
Company anticipates receiving a waiver of this covenant. The Company
anticipates renewing this agreement.
NOTE 5 - 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 (9.0% at
December 31, 1995). The proceeds from this loan were used to reduce
current indebtedness to the bank. At December 31, 1995 the amount
outstanding was $400,000 and the major stockholder extended the due date on
this note to December 14, 1996.
<PAGE> 26
Page 26
NOTE 6 - INCOME TAXES
Provisions (credits) for income taxes from continuing operations
consist of the following:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $106,215 $301,825 $219,546
State 23,313 65,367 43,918
--------- --------- ---------
129,528 367,192 263,464
Deferred 10,288 (18,435) (77,708)
--------- --------- ---------
$139,816 $348,757 $185,756
======== ======== ========
</TABLE>
The components of the deferred assets (liabilities) from
continuing operations are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Allowance for doubtful accounts $ 34,532 $ 34,532
Employee benefit accrual 15,612 20,594
Vacation 9,315 9,315
Equity in earnings of joint venture 1,913 7,219
--------- --------
Net deferred tax assets $ 61,372 $ 71,660
========= ========
</TABLE>
The effective tax rate on income from continuing operations was
different than the statutory federal income tax rate for the following
reasons:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Tax at U.S. statutory rate $117,006 $310,210 $185,293
State income taxes, net of
federal income tax benefit 18,005 43,320 28,907
Goodwill amortization 6,759 6,759 6,759
Adjustment of prior year accrual ---- ---- (39,865)
Other (1,954) (11,532) 4,662
-------- -------- --------
$139,816 $348,757 $185,756
======== ======== ========
</TABLE>
<PAGE> 27
Page 27
NOTE 7 - ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
Salary, payroll taxes and other $162,056 $229,138
Interest 32,442 19,468
Income taxes 128,224 89,218
Real estate taxes 84,260 58,141
Insurance 51,441 85,864
-------- --------
$458,423 $481,829
======== ========
</TABLE>
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company has a qualified profit sharing plan for eligible
employees. Contributions to the plan are determined on a discretionary
basis by the Board of Directors. Amounts charged to expense were as
follows: 1995 - $30,000, 1994 - $30,000, and 1993 - $30,000.
NOTE 9 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
7.74% mortgage note, due 1998 $387,963 $420,677
Prime plus 1/2% term note, due 1999 448,000 560,000
-------- --------
835,963 980,677
Less: current maturities 150,311 145,480
-------- --------
685,652 $835,197
======== ========
</TABLE>
7.74% mortgage note, due 1998:
In September 1993, the Company borrowed $465,159, 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.
As of December 31, 1993, the Company's land and building, having
a net book value of approximately $617,000 were pledged as collateral under
the mortgage agreements.
<PAGE> 28
Page 28
NOTE 9 - LONG-TERM DEBT, continued
Prime plus 1/2% Note, due 1999:
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% at December 31, 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 aggregate long-term debt maturities over each of the next
four years are as follows: 1996 - $150,311, 1997 - $153,384, 1998 -
$420,268, and 1999 - $112,000.
NOTE 10 - LEASE OBLIGATIONS
As of December 31, 1995, the Company leased its operating
facility in Columbia, Missouri, an automobile and its computer equipment
under leases expiring at various dates through 1998. The computer equipment
is leased from the major stockholder.
Future minimum noncancellable lease payments under the above
operating leases are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Lease to major stockholder $ 6,000 $ --- $ ---
Other 33,809 3,809 3,174
------- ------ ------
Total $39,800 $3,809 $3,174
======= ====== ======
</TABLE>
Rent expense is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Rent to major stockholder $ 3,809 $ 3,809 $ 6,957
Other 22,226 45,696 22,644
-------- -------- --------
Total $26,035 $49,505 $29,601
======= ======= =======
</TABLE>
NOTE 11 - STOCKHOLDERS' EQUITY
During 1991, the Company issued 207,000 shares of treasury stock
to employees as a bonus. In connection with this transaction, the Company
recorded $64,688 in unearned compensation which was amortized over three
years. In May 1993, 20,468 shares of this stock issue were redeemed at no
cost.
<PAGE> 29
Page 29
NOTE 11 - STOCKHOLDERS' EQUITY, continued
The Company entered into a warrant agreement in 1991, for
services, with an investment banker for the purchase of 142,500 shares of
Rule 144 Common Stock at an exercise price of $1.00 per share. This
agreement expires July 1, 1996. The Company no longer uses this investment
banker. This is less than 3% of total shares presently outstanding.
During 1994, the Company issued 84,000 shares of treasury stock
to employees as a bonus. In connection with this transaction, the Company
recorded $35,438 in unearned compensation which is being amortized over
three years.
In December 1994, the Company repurchased 18,000 shares of stock
for its treasury at a cost of $14,940.
In the first quarter of 1995, the Company repurchased 64,000
shares of stock for its treasury at a cost of $51,411.
In the second quarter of 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 the second quarter of 1995, the
Company redeemed 4,000 shares of restricted stock through forfeiture.
NOTE 12 - FOREIGN OPERATIONS AND EXPORT SALES
The Company from its United States facility in Broadview, Illinois
markets its products both domestically and internationally. Export sales
were as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Europe $541,948 $ 830,000 $ 823,500
Asia 46,065 120,500 283,500
Other 141,077 158,000 243,000
-------- ---------- ----------
Total $729,090 $1,108,500 $1,350,000
======== ========== ==========
</TABLE>
The Company presently operates in one business segment, "Consumer
Goods."
In August 1994, the Company entered into a Joint Venture agreement
with Mexican individuals for the painting and marketing of its products.
The Company believes this will further reduce costs and open new markets in
the Spanish speaking countries. The Company's ownership interest in the
joint venture is 45%, with 50% held by Mexican individuals and 5% held by a
U.S. individual.
<PAGE> 30
Page 30
NOTE 12 - FOREIGN OPERATIONS AND EXPORT SALES, continued
The investment is being accounted for using the equity method of
accounting. Financial information for this joint venture, accounted for by
the equity method, is as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Current assets $157,000
Noncurrent assets 29,000
Current Liabilities 21,000
Stockholder's equity 165,000
Net Sales 200,000
Gross Margin 24,000
Net Income 36,000
</TABLE>
NOTE 13 - MAJOR CUSTOMERS
The Company sells to over 5,000 customers. One accounted for 22%
of sales in 1995, 20% of sales in 1994 and 16% of sales in 1993. This
customer accounted for 29% and 6% of the outstanding accounts receivable at
December 31, 1995 and 1994, respectively.
NOTE 14 - DISCONTINUED OPERATIONS
As of February 26, 1993 the Company entered into agreements to
sell the tire inventory and order backlog of its XL subsidiary.
Concurrently, the Company adopted a plan to discontinue the operations of
XL. Accordingly, the results of operations for XL to the measurement date
are reflected as discontinued operations.
The Company completed the sale of the tire inventory and
order-backlog of its XL subsidiary during 1993, resulting in a pre-tax gain
on disposal of $53,850 with a tax provision of $18,363.
NOTE 15 - OTHER MATTERS
In December 1993, the Company was petitioned by its factory
employees to allow the Independent Ladies Garment Workers Union ("the
Union") to represent them in a collective bargaining agreement. The
Company and the Union signed a three year collective bargaining agreement
on June 24, 1994. The Company believes there have been no adverse effects
from this agreement.
NOTE 16 - SUBSEQUENT EVENTS
During February, 1996 the Company entered into an agreement to
acquire from Licensed Designs, Inc. their NFL licensing rights. The
Company will compensate Licensed Designs, Inc. in stock and cash an amount
aggregating $60,000 over the next three years. The Company believes this
additional NFL license will allow expansion into markets in which it does
not presently participate.
NOTE 17 - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1995 the Company recorded an
inventory adjustment of approximately $100,000 for products donated to a
charitable organization, and additionally wrote off as uncollectible
$60,000 of accounts receivable.
<PAGE> 31
Page 31
DYNA GROUP INTERNATIONAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance charged
at to costs Balance at
beginning and Deductions end of
Description of period expenses (a) period
----------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Deducted from assets
to which they apply:
Allowance for
doubtful accounts -
Year ended December 31, 1995 $92,000 $131,493 $131,493 $92,000
Year ended December 31, 1994 $92,000 $98,452 $98,452 $92,000
Year ended December 31, 1993 92,000 54,032 54,032 92,000
</TABLE>
(a) Write-off of bad debts.
<PAGE> 32
Page 32
EXHIBIT INDEX
2(a) Plan and Articles of Merger between Red Creek Investments, Inc.
and Dyna Group International, Inc. dated August 22, 1986
(incorporated by reference to Exhibit 2(a) to Form 10
Registration Statement File No. 0-17385).
(b) Agreement and Plan of Reorganization between Red Creek
Investments, Inc. and Dyna Tour Corporation dated August 22,
1986 (incorporated by reference to Exhibit 2(b) to Form 10
Registration Statement File No. 0-17385).
(c) Agreement and Plan of Reorganization between Dyna Group
International, Inc. and Great American Products, Inc. dated
December 26, 1986 (incorporated by reference to Exhibit 2(c) to
Form 10 Registration Statement File No. 0-17385).
(d) Agreement and Plan of Reorganization between Dyna Group
International, Inc. and XL Marketing Corporation dated January
1, 1987 (incorporated by reference to Exhibit 2(d) to Form 10
Registration Statement File No. 0-17385).
3(a) Articles of Incorporation (incorporated by reference to Exhibit
3(a) to Form 10 Registration Statement File No. 0-17385).
(b) By-Laws (incorporated by reference to Exhibit 3(b) to Form 10
Registration Statement File No. 0-17385).
4(a) Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4(a) to Form 10 Registration Statement File No.
0-17385).
10(a) Asset Purchase Agreements between General Tire, Inc. and Hibdon
Tire Centers, Inc. dated February 26, 1993 (incorporated by
reference to Exhibits 10.1 and 10.2 to Form 8-K Dated February
26, 1993, Commission File No. 0-17385).
10(b) Joint Venture Agreement and Manufacturing Agreement between Dyna
Group International, Inc. and Promociones GAP, S.A. De C.V.
dated August 6, 1994 (incorporated by reference to Exhibits 10.3
and 10.4 to Form 10-K dated March 22, 1995).
27 Financial Data Schedule for year ended December 31, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 157,007
<SECURITIES> 0
<RECEIVABLES> 2,497,039
<ALLOWANCES> 92,000
<INVENTORY> 3,667,195
<CURRENT-ASSETS> 6,408,880
<PP&E> 3,176,282
<DEPRECIATION> 2,038,929
<TOTAL-ASSETS> 7,759,676
<CURRENT-LIABILITIES> 4,215,760
<BONDS> 685,652
0
0
<COMMON> 8,180
<OTHER-SE> 2,850,084
<TOTAL-LIABILITY-AND-EQUITY> 7,759,676
<SALES> 10,044,767
<TOTAL-REVENUES> 10,044,767
<CGS> 5,336,504
<TOTAL-COSTS> 5,336,504
<OTHER-EXPENSES> 4,119,276
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244,846
<INCOME-PRETAX> 344,141
<INCOME-TAX> 139,816
<INCOME-CONTINUING> 204,325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204,325
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
