<PAGE> 1
November 7, 1997
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, 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
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.)
1661 S. Sequin Ave., New Braunfels, Texas 78130
(Address of principal executive offices) (Zip Code)
830-620-4400
(Registrant's telephone number, including area code)
(1801 W. 16th Street, Broadview, Illinois, 60153.)
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, 1997 was 7,497,925.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1997 1996
----------- ----------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 0 $ 338,961
Accounts receivable, less allowance
For doubtful accounts of $82,965 2,619,511 2,888,815
Inventories 3,844,659 3,814,075
Prepaid expenses and other 92,923 126,451
Refundable income taxes 157,658 127,433
Deferred tax assets 53,963 53,963
----------- ----------
6,768,714 7,349,698
----------- ----------
PROPERTY AND EQUIPMENT, less
Accumulated depreciation of
$2,758,545 and $2,453,640 966,524 1,089,036
---------- ----------
OTHER ASSETS:
Cost in excess of net assets of acquired
business, less accumulated amortization
of $135,752 and $120,843 0 14,909
Investment in joint venture 83,064 94,906
Due from joint venture 34,307 0
Other 207,868 115,444
---------- ----------
325,239 225,259
---------- ----------
$8,060,477 $8,663,993
---------- ----------
</TABLE>
See accompanying notes.
<PAGE> 3
Page 3
<TABLE>
<CAPTION>
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND
STOCKHOLDERS' EQUITY September 30, December 31,
1997 1996
--------- --------
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable bank $ 2,747,142 $ 3,469,142
Notes payable related party 550,000 350,000
Accounts payable 851,750 800,213
Accrued expenses 306,570 284,698
Due to joint venture 0 88,389
Current maturities of long-term debt 50,004 50,004
----------- -----------
$ 4,505,466 $ 5,042,446
----------- -----------
LONG-TERM DEBT BANK: 658,326 695,829
----------- -----------
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 2,045,276 2,094,947
Treasury stock - 681,779 and 696,779
shares, at cost (131,084) (140,084)
Unearned compensation 0 (4,438)
----------- -----------
2,896,685 2,925,718
----------- -----------
$ 8,060,477 $ 8,663,993
----------- -----------
</TABLE>
See accompanying notes.
<PAGE> 4
Page 4
<TABLE>
<CAPTION>
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended September 30,
1997 1996
---------- ----------
<S> <C> <C>
NET SALES $2,471,435 $3,437,167
COST OF SALES 1,371,116 1,816,840
---------- ----------
Gross profit 1,100,319 1,620,327
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 877,095 1,163,541
---------- ----------
Operating income 223,224 456,786
INTEREST EXPENSE 90,972 75,144
EQUITY IN EARNINGS OF JOINT VENTURE 35,185 43,489
---------- ----------
Income before income
taxes 167,437 425,131
CREDIT FOR INCOME TAXES 63,982 161,550
---------- ----------
NET INCOME $ 103,455 $ 263,581
========== ==========
LOSS PER COMMON SHARE $ .01 $ .04
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,482,925
</TABLE>
See accompanying notes.
<PAGE> 5
Page 5
<TABLE>
<CAPTION>
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30,
1997 1996
----------- ----------
<S> <C> <C>
NET SALES $ 7,360,997 $ 8,215,891
COST OF SALES 4,581,305 4,877,258
----------- -----------
Gross profit 2,779,692 3,338,633
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,708,748 3,007,758
----------- -----------
Operating Income 70,944 330,875
INTEREST EXPENSE 246,643 214,852
EQUITY IN EARNINGS OF JOINT VENTURE 96,158 57,383
----------- -----------
Loss before income
taxes (79,541) 173,406
CREDIT FOR INCOME TAXES (29,870) 65,895
----------- -----------
NET LOSS $ (49,671) $ 107,511
=========== ===========
LOSS PER COMMON SHARE $ (.01) $ .02
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,477,592
</TABLE>
See accompanying notes.
<PAGE> 6
Page 6
<TABLE>
<CAPTION>
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended Sep. 30,
1997 1996
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (49,671) $ 107,511
Adjustments to reconcile loss to net cash used
by operating activities -
Depreciation and amortization 319,814 309,483
Provision for losses on accounts receivable 3,539 88,014
Amortization of unearned compensation 4,438 11,976
Change in assets and liabilities:
Decrease (increase)in accounts receivable 265,765 (507,917)
Decrease (increase) in inventories (30,584) 29,032
Decrease (increase)in prepaid expenses and other 3,303 (16,705)
Increase in accounts payable 51,537 542,964
Increase (decrease)in accrued expenses 21,872 (131,101)
Increase (decrease) in due to joint venture (122,696) 128,813
Increase in other assets (80,582) (211,890)
------------ ----------
Cash provided (used) by operating activities 386,735 350,180
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditure ( 182,393) (270,329)
Cash used by investing activities ( 182,393 ) (270,329)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (37,503) (112,011)
Increase (decrease) in notes payable (522,000) (138,500)
Issue treasury stock 16,200 20,000
------------ -----------
Cash provided (used) by financing activities (543,303) (230,511)
------------ -----------
DECREASE IN CASH ( 338,961) (150,660)
----------- -----------
CASH, beginning of period 338,961 157,007
----------- -----------
CASH, end of period $ 0 $ 6,347
----------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest $ 230,922 $ 194,208
Income Taxes ---------- 149,713
</TABLE>
See accompanying notes
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Page 7
DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - FINANCIAL INFORMATION
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals 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 September 30, 1997 and for the
three months and nine months ended September 30, 1997 and September 30, 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
<TABLE>
Inventories consist of the following:
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Raw materials and work in process $ 1,152,074 $ 998,453
Finished goods 2,692,585 2,815,622
----------- -----------
$ 3,844,659 $ 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 3 - STOCKHOLDERS' EQUITY - CONTINUED
During the second quarter of 1997, while the Company was preparing for its
annual meeting, the Company requested an updated stockholder listing from its
stock transfer agent. According to the listing, the number of outstanding
shares per the Company's records was 30,000 higher than shown by the transfer
agent's records. The Company decreased the number of outstanding shares by
30,000 and increased its treasury stock by 30,000 shares to coincide with the
transfer agent's records.
NOTE 4 - ADJUSTMENTS
During the fourth quarter of 1996 the Company recorded a book-to-physical
inventory adjustment. The financial statements for the quarter and nine months
ended September 30, 1997 have been restated to reflect the impact of this
adjustment on the third quarter's and nine months' operating results.
Accordingly, the 1996 pre-tax earnings for the third quarter and the nine
months have been reduced by $28,588 and $494,467, respectively, and the net
income for the third quarter and the nine months was reduced by $17,725 and
$306,570, respectively.
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 September 30, 1997 increased to 1.6 to 1
compared to 1.5 to 1 at December 31, 1996. Cash in bank decreased by $338,961
during the period.
Operating activities provided cash flow of $386,735 with income from operations
and non-cash adjustments providing $278,120. Changes in assets and liabilities
provided $ 108,615. The net increase related to assets and liabilities was
primarily due to significant reductions of account receivables along with
increases in accounts payable and accrued expenses. These increases were
partially offset by increases in inventories and other assets and a decrease in
the due to joint venture account.
Capital expenditures for dies and molds used $172,387 while other capital
expenditures used $10,006.
Financing activities used $ 543,303 due to repayments on notes payable and
long-term debt. At September 30, 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 September 30, 1997 there was $326,062
available for borrowing. This line of credit matures on December 31, 1997. The
Company does not anticipate renewing this agreement and is pursuing other
sources of financing in Texas.
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As of September 30, 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.
Results of Operations
Net sales for the quarter ended September 30, 1997 as compared to the quarter
ended September 30, 1996 decreased $ 965,732 or 28.1%. Gross margin percent
decreased to 44.5% as compared to 47.1% in 1996. This decrease is attributable
to sales mix and increased costs related to the physical relocation of the
company from Illinois to Texas.
Selling, general and administrative expenses as a percent of sales increased to
35.5% in 1997 from 33.9% in 1996. This increase is due mainly to lower sales
levels in the 3rd quarter of 1997.
Interest expense increased as a result of higher borrowing levels as compared
to last year.
The Company's share of profits from its joint venture decreased $8,304 as
compared to 1996. This was due to lower July and August production levels in
Mexico in 1997.
As a result of the foregoing, income before taxes decreased $257,694 to
$167,437 and income after taxes decreased $160,126 to $103,455.
Net sales for the nine months ended September 30, 1997 as compared to the nine
months ended September 30, 1996 decreased $854,894 or 10.4%. Gross margin
percent decreased 2.8% as a result of a change in sales mix and increased costs
related to the physical relocation.
Selling, general and administrative expenses as a percent of sales increased
from 36.6% in 1996 to 36.8% in 1997. This increase in percentage is due to
reduced sales levels 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, 1997 increased over
the similar period in 1996 as a result of higher borrowing levels.
The Company's share of joint venture operations for the nine months ended
September 30, 1997 was a gain of $96,158 compared to a gain of $57,383 for the
same period in 1996. This increase was due to overall higher production levels
in Mexico in 1997 as compared to 1996. As a result of the foregoing, income
before taxes decreased $252,957 to ($ 79,541) and income after taxes decreased
$157,182 to ($ 49,671).
<PAGE> 10
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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 7, 1997 /s/ Roger R. Tuttle
-----------------------------
(Signature) Roger R. Tuttle, Chairman of
the Board and Chief Executive
Officer
Date: November 7, 1997 /s/ Scott E. Schwind
------------------------------
(Signature) Scott E. Schwind, Treasurer
(Principal Accounting and
Financial Officer
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit # Description
<C> <S>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,702,476
<ALLOWANCES> 82,965
<INVENTORY> 3,844,659
<CURRENT-ASSETS> 6,768,714
<PP&E> 3,725,069
<DEPRECIATION> 2,758,545
<TOTAL-ASSETS> 8,060,477
<CURRENT-LIABILITIES> 4,505,466
<BONDS> 658,326
0
0
<COMMON> 8,180
<OTHER-SE> 2,888,505
<TOTAL-LIABILITY-AND-EQUITY> 8,060,477
<SALES> 7,360,997
<TOTAL-REVENUES> 7,360,997
<CGS> 4,581,305
<TOTAL-COSTS> 4,581,305
<OTHER-EXPENSES> 2,708,748
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246,643
<INCOME-PRETAX> (79,541)
<INCOME-TAX> (29,870)
<INCOME-CONTINUING> (49,671)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,671)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
