<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended: September, 30, 1996
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number: 0-17385
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DYNA GROUP INTERNATIONAL, INC.
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(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
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(Address of principal executive offices) (Zip Code)
708 - 450-9200
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(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
September 30, 1996 was 7,482,925.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
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------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------ ------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 6,347 $ 157,007
Accounts receivable, less allowance
for doubtful accounts of $92,000 2,824,942 2,405,039
Inventories 4,132,630 3,667,195
Prepaid expenses and other 134,972 118,267
Deferred tax assets 61,372 61,372
---------- ----------
7,160,263 6,408,880
---------- ----------
PROPERTY AND EQUIPMENT, less
accumulated depreciation of
$2,333,502 and $2,038,929 1,113,109 1,137,353
---------- ----------
OTHER ASSETS:
Cost in excess of net assets of acquired
business, less accumulated amortization
of $115,873 and $100,963 19,879 34,789
Investment in joint venture 281,808 84,821
Other 108,735 93,833
---------- ----------
410,422 213,443
---------- ----------
$8,683,794 $7,759,676
========== ==========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
------------------------------
------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND
--------------- September 30, December 31,
STOCKHOLDERS' EQUITY 1996 1995
-------------------- ------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable bank $2,476,500 $2,565,000
Notes payable related party 350,000 400,000
Accounts payable 1,184,990 642,026
Due to joint venture 128,813 -----
Accrued expenses 515,219 458,423
Current maturities of long-term debt 150,311 150,311
---------- ----------
4,805,833 4,215,760
---------- ----------
LONG-TERM DEBT BANK: 573,641 685,652
---------- ----------
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 967,113 950,687
Retained earnings 2,477,541 2,063,460
Treasury stock - 696,779 and 714,557
shares, at cost (140,084) (143,657)
Unearned compensation (8,430) (20,406)
---------- ----------
3,304,320 2,858,264
---------- ----------
$8,683,794 $7,759,676
========== ==========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
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------------------------------------------------
<TABLE>
Three Months Ended September 30,
--------------------------------
1996 1995
---------- ---------
<S> <C> <C>
NET SALES $3,437,167 $3,077,217
COST OF SALES 1,894,055 1,677,875
Gross profit 1,543,112 1,399,342
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,163,541 1,005,227
---------- ----------
Operating income 379,571 394,115
INTEREST EXPENSE 75,144 61,608
EQUITY IN EARNINGS OF JOINT VENTURE 149,292 13,551
---------- ----------
Income before income
taxes 453,719 346,058
PROVISION FOR INCOME TAXES 172,413 131,502
---------- ----------
NET INCOME $ 281,306 $ 214,556
========== ==========
INCOME PER COMMON SHARE $ .04 $ .03
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,482,925 7,465,147
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
------------------------------------------------
------------------------------------------------
<TABLE>
Nine Months Ended September 30,
1996 1995
---------- ----------
<S> <C> <C>
NET SALES $8,215,891 $7,241,424
COST OF SALES 4,522,395 3,803,578
---------- ----------
Gross profit 3,693,496 3,437,846
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,007,758 2,727,749
---------- ----------
Operating income 685,738 710,097
INTEREST EXPENSE 214,852 162,280
EQUITY IN EARNINGS OF JOINT VENTURE 196,987 6,201
---------- ----------
Income before income
taxes 667,873 554,018
PROVISION FOR INCOME TAXES 253,792 210,527
---------- ----------
NET INCOME $ 414,081 $ 343,491
========== ==========
INCOME PER COMMON SHARE $ .06 $ .05
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,477,592 7,464,747
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
--------- ---------
<S> <C> <C>
Net income $ 414,081 $ 343,491
Adjustments to reconcile income from
operations to net cash used
by operating activities -
Depreciation and amortization 309,483 232,803
Provision for losses on accounts receivable 88,014 30,888
Amortization of unearned compensation 11,976 11,889
(Gain) from joint venture (196,987) (6,201)
Change in assets and liabilities:
Increase in accounts receivable (507,917) (827,472)
Increase in inventories (465,435) (983,379)
Increase in prepaid expenses and other (16,705) (76,172)
Increase in accounts payable 542,964 493,012
Increase in accrued expenses 56,796 41,809
Increase in payable to joint venture 128,813 -----
Increase in other assets (14,903) (18,977)
--------- ---------
Cash provided (used) by operating activities 350,180 (758,309)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (270,329) (331,093)
--------- ---------
Cash used by investing activities (270,329) (331,093)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (112,011) (107,008)
Increase (decrease) in notes payable (138,500) 967,000
Issue treasury stock 20,000 -----
Repurchase common stock ----- (51,411)
--------- ---------
Cash provided (used) by financing activities (230,511) 808,581
--------- ---------
DECREASE IN CASH (150,660) (280,821)
CASH, beginning of period 157,007 305,610
--------- ---------
CASH, end of period $ 6,347 $ 24,789
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 194,208 $ 160,739
Income Taxes 149,713 90,522
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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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, 1995.
The financial information included herein at September 30, 1996 and for
the three months and nine months ended September 30, 1996 and September 30,
1995 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, 1995 was derived from the Company's audited financial
statements for 1995.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------- ---------------
<S> <C> <C>
Raw materials and work in process $1,112,301 $1,131,045
Finished goods 3,020,329 2,536,150
---------- ----------
$4,132,630 $3,667,195
========== ==========
</TABLE>
NOTE 3 - NOTES PAYABLE BANK
Effective October 21, 1996 the Company changed its primary banking
relationship. As a result of the change, the Company paid off its old line of
credit with its former bank, and established a new line of credit with its new
bank. The maximum borrowing permitted on the new line remains unchanged at
$3,750,000, and the loan maturity date is August 31, 1997. The interest rate
on the new line is a blended rate tied to the prime rate (approximately
8.5%).
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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NOTE 4 - LONG-TERM DEBT BANK
Effective October 21, 1996, the Company changed its primary banking
relationship. As a result of the change, the Company paid off two term loans
to its former bank. One loan had a maturity date of October 14, 1999
with an interest rate of prime + 1/2%, and the second loan had a maturity date
of September 1, 2003 with an interest rate of 7.74%. At the same time, the
Company took out a single new installment loan with its new bank. The new loan
has a maturity date of October 21, 2001 with an interest rate of prime + 1/4%.
NOTE 5 - STOCKHOLDERS' EQUITY
During the first quarter of 1996 the Company issued 17,778 shares of stock
from its treasury at a cost of $3,573, and an issuance price of $20,000 for the
acquisition of certain NFL licensing rights.
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Item 2. Management's Discussion and Analysis of FinancialCondition
and Results of Operations
Liquidity and Capital Resources
The Company's working capital ratio at September 30, 1996 remained
unchanged from 1.5 to 1 at December 31, 1995. Cash in bank decreased by
$150,660 during the period.
Operating activities provided cash flow of $350,180 with income from
operations and non-cash adjustments providing $626,567. Changes in net working
capital used $276,387. The net decrease in working capital was primarily due to
strong business activity during the third quarter 1996 resulting in large
increases in accounts receivable and inventories which were offset somewhat by
increases in payables and accrued expenses.
Capital expenditures, mostly for dies and molds, used $270,329. Financing
activities used $230,511, primarily due to repayments on notes payable and
long-term debt.
At September 30, 1996, the Company has a revolving line of credit with a
bank allowing borrowing up to $3,750,000 against qualified accounts receivable
and inventory. At September 30, 1996 approximately $770,000 was available for
borrowing. This line of credit has a maturity date of August 30, 1997.
As of September 30, 1996, 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 quarter ended September 30, 1996 as compared to the
quarter ended September 30, 1995 increased $359,950 or 11.7%.
Selling, general and administrative expenses as a percent of sales
increased to 33.9% in 1996 from 32.7% in 1995. This increase is primarily due
to greater selling costs, especially for commissions and royalties.
Interest expense increased as a result of higher borrowing levels as
compared to last year.
The Company's equity in the earnings of the joint venture increased
$135,741 as compared to 1995. This was due to higher production levels in
Mexico in 1996.
As a result of the foregoing, income before taxes increased $107,661 to
$453,719 and income after taxes increased $66,750 to $281,306.
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Net sales for the nine months ended September 30, 1996 as compared to the
nine months ended September 30, 1995 increased $974,467 or 13.5%.
Selling, general and administrative expenses as a percent of sales
decreased from 37.7% in 1995 to 36.6% in 1996. This decrease is due to
management's emphasis on cost control along with the fixed nature of many of
these costs which do not fluctuate with sales volume changes.
Interest expense for the nine months ended September 30, 1996 increased
over the similar period in 1995 as a result of higher borrowing levels.
The Company's equity in the earnings of the joint venture for the nine
months ended September 30, 1996 was $196,987 compared to $6,201 for the same
period in 1995. This increase was due to higher production levels in Mexico in
1996 as compared to 1995.
As a result of the foregoing, income before taxes increased $113,855 to
$667,873 and income after taxes increased $70,590 to $414,081.
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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: November 12, 1996 /s/ Roger R. Tuttle
----------------- ----------------------------------------
(Signature) Roger R. Tuttle, Chairman of the Board
and Chief Executive
Officer
Date: November 12, 1996 /s/ Tomas J. Heslinga
----------------- ----------------------------------------
(Signature) Thomas J. Heslinga, Treasurer (Principal
Accounting and
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,347
<SECURITIES> 0
<RECEIVABLES> 2,916,942
<ALLOWANCES> 92,000
<INVENTORY> 4,132,630
<CURRENT-ASSETS> 7,160,263
<PP&E> 3,446,611
<DEPRECIATION> 2,333,502
<TOTAL-ASSETS> 8,683,794
<CURRENT-LIABILITIES> 4,805,833
<BONDS> 573,641
0
0
<COMMON> 8,180
<OTHER-SE> 3,296,140
<TOTAL-LIABILITY-AND-EQUITY> 8,683,794
<SALES> 8,215,891
<TOTAL-REVENUES> 8,215,891
<CGS> 4,522,395
<TOTAL-COSTS> 4,522,395
<OTHER-EXPENSES> 3,007,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214,852
<INCOME-PRETAX> 667,873
<INCOME-TAX> 253,792
<INCOME-CONTINUING> 414,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 414,081
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>