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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: March 31, 1997
-------------------
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
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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
- --------------------------------------------------------------------------------
(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
March 31, 1997 was 7,527,925.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
-----------------------------------------------
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 104,863 $ 338,961
Accounts receivable, less allowance
for doubtful accounts of $92,000 1,790,111 2,888,815
Inventories 3,979,370 3,814,075
Prepaid expenses and other 156,569 126,451
Refundable Income taxes 130,951 127,433
Deferred tax assets 53,963 53,963
------------ ------------
6,215,827 7,349,698
------------ ------------
PROPERTY AND EQUIPMENT, less
accumulated depreciation of
$2,550,434 and $2,453,640 1,081,945 1,089,036
------------ ------------
OTHER ASSETS:
Cost in excess of net assets of acquired
business, less accumulated amortization
of $125,812 and $120,843 9,940 14,909
Investment in joint venture 81,988 94,906
Other 150,162 115,444
------------ ------------
242,090 225,259
------------ ------------
$ 7,539,862 $ 8,663,993
============ ============
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
-------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND March 31, December 31,
STOCKHOLDERS' EQUITY 1997 1996
-------------------- ------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ 2,259,142 $ 3,469,142
Notes payable related party 350,000 350,000
Accounts payable 991,314 800,213
Accrued expenses 241,453 284,698
Due to Joint Venture 42,182 88,389
Current maturities of long-term debt 50,004 50,004
------------ ------------
3,934,095 5,042,446
------------ ------------
LONG-TERM DEBT BANK: 683,328 695,829
------------ ------------
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 974,313 967,113
Retained earnings 2,089,208 2,094,947
Treasury stock - 651,779 and
696,779 (131,084) (140,084)
Unearned compensation (18,178) (4,438)
------------ ------------
2,922,439 2,925,718
------------ ------------
$ 7,539,862 $ 8,663,993
============ ============
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
1997 1996
------------ -------------
<S> <C> <C>
NET SALES $ 2,486,907 $ 2,272,678
COST OF SALES 1,468,836 1,467,241
------------ ------------
Gross profit 1,018,071 805,437
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 971,662 842,308
------------ ------------
Operating income 46,409 (36,871)
INTEREST EXPENSE 78,748 70,350
EQUITY IN EARNINGS OF
JOINT VENTURE 23,082 ----
------------ ------------
Income from operations
before income taxes (9,257) (107,221)
PROVISION FOR INCOME TAXES (3,518) (40,744)
------------ ------------
NET INCOME $ (5,739) $ (66,477)
============ ============
INCOME PER COMMON SHARE $ .00 $ (.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,494,175 7,469,592
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
------------ ------------
<S> <C> <C>
Net loss $ (5,739) $ (66,477)
Adjustments to reconcile net loss to net cash
used by operating activities -
Depreciation and amortization 101,763 103,161
Provision for losses on accounts receivable 3,793 ----
Amortization of unearned compensation 2,460 3,992
Other (12,918) ----
Equity in earnings of joint venture (23,082) ----
Change in assets and liabilities:
Decrease in accounts receivable 1,094,911 699,872
Increase in inventories (165,295) (45,765)
Increase in prepaid expenses and other (33,636) (133,395)
Increase in accounts payable 191,101 168,355
Decrease in accrued expenses (43,245) (129,950)
Increase in other assets (21,800) (2,827)
Decrease in due to joint venture (46,207) ----
------------ ------------
Cash (used) provided by operating activities 1,042,106 596,966
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (89,703) (82,393)
Distribution from joint venture 36,000 ----
------------ ------------
Cash used by investing activities (53,703) (82,393)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (12,501) (37,206)
Decrease in notes payable (1,210,000) (572,706)
Advance to joint venture ---- (74,499)
Issue treasury stock ---- 20,000
------------ ------------
Cash provided (used) by financing activities (1,222,501) (664,411)
------------ -------------
DECREASE IN CASH (234,098) (149,838)
CASH, beginning of period 338,961 157,007
------------ ------------
CASH, end of period $ 104,863 $ 7,169
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 91,191 $ 67,663
Income Taxes ---- 142,781
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
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-KSB for the year ended December 31, 1996.
The financial information included herein at March 31, 1997 and for the
three months ended March 31, 1997 and March 31, 1996 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, 1996 was
derived from the Company's audited financial statements for 1996.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Raw materials and work in process $ 1,196,413 $ 998,453
Finished goods 2,782,957 2,815,622
------------ ------------
$ 3,979,370 $ 3,814,075
============ ============
</TABLE>
NOTE 3 - 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.
During the first quarter of 1997, the Company issued 45,000 shares of
treasury stock to employees as a bonus. In connection with this transaction,
the Company recorded $16,200 in unearned compensation which is being amortized
over three years.
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NOTE 4 - ADJUSTMENTS
During the fourth quarter of 1996, the Company recorded a book-to-physical
inventory adjustment. The financial statements for the quarter ended March 31,
1996 have been restated to reflect the impact of this adjustment on the first
quarter's operating results. Accordingly, the first quarter 1996 pre-tax
earnings have been reduced by $195,000, and the net income for that quarter was
reduced by $121,000.
For a further explanation of this adjustment, refer to Note 15 of the
Company's 10-KSB for the year ended December 31, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company's working capital ratio at March 31, 1997 increased to 1.6 to
1 from 1.5 to 1 at December 31, 1996. Cash in bank decreased by $234,098
during the quarter.
Operating activities provided cash flow of $1,042,106, with income from
operations and non-cash adjustments providing $66,277. Changes in assets and
liabilities provided $975,829. The net increase related to assets and
liabilities was primarily due to vigorous collections of accounts receivable
along with a moderate increase in accounts payable. These increases were
partially offset by increases in inventories, prepaid expenses and other
assets, and decreases in accrued expenses and payables to the joint venture.
Capital expenditures for dies and molds used $89,703, while distributions
from the joint venture provided $36,000.
Financing activities used $1,222,501, due to repayments on notes payable
and long-term debt. At March 31, 1997, 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 March 31, 1997 approximately $101,000
was available for borrowing. This line of credit is due August 31, 1997. The
Company anticipates renewing this agreement.
As of March 31, 1997, 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.
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Results of Operations
Net sales for the quarter ended March 31, 1997 as compared to March 31,
1996 increased $214,229. Cost of sales was unchanged for the two years even
with the sales increase, with the result that gross margin increased to 41% as
compared to 35% in 1996. This increase in margin reflects the change in how
the Company operated during the two quarters. In 1997 a greater proportion of
the Company's products were manufactured by its joint venture, resulting in
higher purchases in 1997 versus 1996. However, savings in other
manufacturing costs, primarily wages and benefits and shop supplies nearly
offset the increase in purchases. Also, the changeover to using only fine
pewter produced a decrease in plating charges. Combined these factors produced
the gross margin increase.
Selling, general and administrative expenses as a percent of sales
increased to 39% in 1997 from 37% in 1996. This increase was due to higher
commissions and royalties as well as some added expenses incurred as a result
of the relocation of manufacturing and shipping from Illinois to Texas.
Interest expense increased as a result of higher borrowing levels as
compared to last year.
As a result of the foregoing, the loss before taxes decreased $97,964 to
$(9,257) and the loss after taxes decreased $60,738 to $(5,739).
PART II - OTHER INFORMATION
Item 5. Other Information
Mr. William Sandstrom has resigned his position as an outside director
of the Dyna Group Board of Directors effective April 15, 1997.
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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: May 14, 1997 /s/ Roger R. Tuttle
-------------- ----------------------------------------
(Signature) Roger R. Tuttle, Chairman of the Board
and Chief Executive Officer
Date: May 14, 1997 /s/ Thomas J. Heslinga
-------------- ----------------------------------------
(Signature) Thomas J. Heslinga, Treasurer (Principal
Accounting and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 104863
<SECURITIES> 0
<RECEIVABLES> 1882111
<ALLOWANCES> 92000
<INVENTORY> 3979370
<CURRENT-ASSETS> 6215827
<PP&E> 3632379
<DEPRECIATION> 2550434
<TOTAL-ASSETS> 7539862
<CURRENT-LIABILITIES> 3934095
<BONDS> 683328
0
0
<COMMON> 8180
<OTHER-SE> 2914259
<TOTAL-LIABILITY-AND-EQUITY> 7539862
<SALES> 2486907
<TOTAL-REVENUES> 2486907
<CGS> 1468836
<TOTAL-COSTS> 1468836
<OTHER-EXPENSES> 971662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78748
<INCOME-PRETAX> (9257)
<INCOME-TAX> (3518)
<INCOME-CONTINUING> (5739)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5739)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
