<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: June 30, 1998
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
June 30, 1998 was 7,497,925.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 16,570 $ 217,858
Accounts receivable, less allowance
For doubtful accounts of $92,000 1,502,799 2,043,885
Inventories 2,524,478 2,713,439
Prepaid expenses and other 61,313 74,419
Refundable income taxes 371,000 371,000
Deferred tax assets (121) --
Due from joint venture 332,074 296,872
Land & building held for resale - net -- 548,167
----------- -----------
4,807,580 6,265,640
----------- -----------
PROPERTY AND EQUIPMENT
Net 433,557 510,859
----------- -----------
OTHER ASSETS:
Investment in joint venture 83,064 94,906
Other 181,931 105,247
----------- -----------
264,837 200,153
----------- -----------
$ 5,506,132 $ 6,976,652
=========== ===========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
June 30, December 31,
1998 1997
---------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable bank $ 1,784,882 $ 2,747,142
Notes payable related party 550,000 550,000
Accounts payable 328,864 463,010
Accrued expenses 312,670 293,497
Current maturities of long-term debt 55,682 693,688
----------- -----------
$ 3,032,098 $ 4,747,337
----------- -----------
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 964,863 974,313
Retained earnings 1,632,075 1,388,706
Treasury stock - 681,779 and 696,779
shares, at cost (131,084) (140,084)
Unearned compensation -- (10,800)
----------- -----------
2,474,034 2,229,315
----------- -----------
$ 5,506,132 $ 6,976,652
=========== ===========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
---- ----
<S> <C> <C>
NET SALES $ 3,672,563 $ 4,889,562
COST OF GOODS SOLD 2,308,053 3,210,189
EQUITY IN EARNINGS OF JOINT VENTURE 272,226 60,973
----------- -----------
Gross profit 1,636,736 1,740,346
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,519,167 1,831,653
----------- -----------
Operating Income/Loss 117,098 (91,307)
INTEREST EXPENSE 159,167 155,671
GAIN ON SALE OF PROPERTY 284,652 --
----------- -----------
Loss/Income before income
taxes 242,583 (246,978)
CREDIT FOR INCOME TAXES 86 (93,852)
----------- -----------
NET LOSS $ 242,583 $ (153,126)
=========== ===========
LOSS PER COMMON SHARE $ (.02) $ (.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,494,175
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
---- ----
<S> <C> <C>
NET SALES $ 2,183,443 $ 2,402,655
COST OF SALES 1,393,443 1,741,353
EQUITY IN EARNINGS OF JOINT VENTURE 160,972 37,891
----------- -----------
Gross profit 950,972 699,193
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 940,798 859,991
----------- -----------
Operating Loss 10,174 (160,798)
INTEREST EXPENSE 73,902 76,923
GAIN ON SALE OF PROPERTY 284,652 --
----------- -----------
Net Income before income
taxes 220,924 (237,721)
CREDIT FOR INCOME TAXES 86 (90,334)
----------- -----------
NET INCOME $ 221,010 $ (147,387)
=========== ===========
LOSS PER COMMON SHARE $ (.02) $ (.02)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,512,925
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (41,983) $ (153,126)
Adjustments to reconcile loss to net cash used
by operating activities -
Depreciation and amortization 115,407 210,836
Provision for losses on accounts receivable 22,655 3,539
Amortization of unearned compensation -- (11,281)
Change in assets and liabilities:
Decrease in accounts receivable 541,620 1,055,053
Decrease in inventories 308,961 (154,932)
Decrease in prepaid expenses and other 15,185 (128,690)
Decrease in accounts payable 75,404 127,088
Increase in accrued expenses 75,506 (17,958)
Increase in due to joint venture (35,202) 12,429
Decrease (increase) in other assets 314,332 (47,673)
----------- -----------
Cash provided (used) by operating activities 1,391,885 834,312
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditure (80,000) (175,750)
Sale of land & building 117,000
Cash used by investing activities 37,000 (175,750)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (684,113) (25,002)
Increase (decrease) in notes payable (962,260) (1,048,000)
Issue treasury stock 16,200 16,200
----------- -----------
Cash provided (used) by financing activities (1,630,173) (1,067,929)
----------- -----------
DECREASE IN CASH (201,288) (337,267)
----------- -----------
CASH, beginning of period 217,858 338,961
----------- -----------
CASH, end of period $ 16,570 $ 1,694
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest $ 96,122 158,109
Income Taxes -- --
</TABLE>
See accompanying notes
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - FINANCIAL INFORMATION
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to or as permitted by such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the consolidated financial statements and footnotes
thereto contained in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
The financial information included herein at June 30, 1998 and for the three
months and six months ended June 30, 1998 and June 30, 1997 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, 1997 was derived from the
Company's audited financial statements for 1997.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Raw materials and work in process $ 391,150 $ 609,757
Work in process 252,156
Finished goods 2,041,328 1,851,526
----------- -----------
$ 2,432,478 $ 2,713,439
=========== ===========
</TABLE>
NOTE 3 - STOCKHOLDERS' EQUITY
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. During the 2nd Quarter of 1998 the Company purchased 27,778 shares at
market price and issued those shares to nine employees as a bonus.
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NOTE 4 - ADJUSTMENTS
During the fourth quarter of 1997 the Company recorded an inventory adjustment
of $400,000 and a loss of $706,241. The financial statements for the quarter and
six months ended June 30, 1997 have been restated to reflect the impact of this
adjustment on the second quarter's and six months' operating results.
Accordingly, the 1997 pre-tax earnings for the second quarter and the six months
have been reduced by $258,160 and the net income for the first quarter was
reduced by $189,272. The second quarter 1997 earnings have been reduced by
$182,000.
For a further explanation of this adjustment, refer to Note 15 of the Company's
10-KSB for the year ended December 31, 1997.
NOTE 5 - SUBSEQUENT EVENT
On May 1, 1998 the Company sold the land and building located in Illinois. This
sale will result in a pre-tax gain of $288,000 for 1998. As a result of this
sale, the Company's long-term debt was reclassified as short-term debt for
December 31, 1997, and March 31, 1998 respectively. This land and building in
Illinois was also reclassified as a current asset for these reporting periods.
All principal and interest was paid in full at closing.
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 June 30, 1998 increased to 1.6 from to
1.3 at December 31, 1997. Cash in bank decreased by $201,288 during the period.
Operating activities provided cash flow of $1,3941,312 with income from
operations and non-cash adjustments providing $(4,205). Changes in assets and
liabilities provided $1,066,847. The net increase related to assets and
liabilities was primarily due to significant reductions of account receivables
and inventory. These increases were partially offset by decreases in accounts
payable.
Financing activities used $ 1,630,173 due to repayments on notes payable and
long-term debt. At June 30, 1998, the Company has a revolving line of credit
with a bank allowing borrowing up to $3,750,000 against qualified accounts
receivable and inventory. Effective April 3,1998, the Company secured a new line
of credit with a Texas bank with a maximum borrowing limit of $4,000,000.
As of June 30, 1998, there are no material commitments for future capital
expenditures, and management does not anticipate any major expenditures in the
foreseeable future. It is management" 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 June 30, 1998 as compared to the quarter ended
June 30, 1997 decreased $1,216,999 or 24.8%. This decrease in sales primarily
relates to the discontinuation of the unprofitable gift, floral and small
customer accounts.
The gross margin percent increased to 44.6% as compared to 35.6% in 1997. This
was due to the majority of production being done in Mexico.
The total selling, general and administrative expenses decreased 17% this year,
from $1,831,653 in 1997 to $1,519,638 in 1998. The primary reason the reduction
in costs is due to the elimination of expenses relating to the Broadview
facility in Illinois and the reduction of cost related to the discontinuation of
the unprofitable gift & floral and small custom accounts.
Interest expense decreased by $6,481 as a result of lower average borrowing
levels in 1998 when compared to last year, despite slightly higher interest
rate.
The Company's share of profits from its joint venture increased $9,918 when
compared to 1997. This increase was caused by higher production levels in Mexico
in the second quarter of 1998, due to the transfer of most of the production
from the closed Illinois facility to the joint venture.
For the second quarter of 1998 the Company's pre-tax income was $220,924 as
compared to the restated loss for 1997 of ($246,978). This change in earnings is
primarily due to the lower cost involved with having the majority of production
done in Mexico and the elimination of almost all expenses relating to the
Illinois operation, and the sale of the property in Illinois.
The only expenses involved with the discontinued operation in Illinois for the
first quarter of 1998 related to the fixed costs involved in maintaining the
facility. The sale of the land and Building was completed on May 1,1998 and
these costs stopped as of that date.
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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: August 20, 1997 /s/ Roger R. Tuttle
-----------------------------------------
(Signature) Roger R. Tuttle, Chairman of the Board and
Chief Executive Officer
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 16,570
<SECURITIES> 0
<RECEIVABLES> 1,502,799
<ALLOWANCES> 92,000
<INVENTORY> 2,542,478
<CURRENT-ASSETS> 4,807,580
<PP&E> 433,557
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,506,132
<CURRENT-LIABILITIES> 3,032,098
<BONDS> 0
0
0
<COMMON> 8,180
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,506,132
<SALES> 3,672,563
<TOTAL-REVENUES> 3,672,563
<CGS> 2,035,827
<TOTAL-COSTS> 1,519,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 242,583
<INCOME-TAX> (86)
<INCOME-CONTINUING> (42,069)
<DISCONTINUED> 284,652
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,583
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
