<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: March 31, 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)
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, 1998 was 7,497,925.
<PAGE> 2
Page 2
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS March 31, 1998 December 31, 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 210,490 $ 217,858
Accounts receivable, less allowance
For doubtful accounts of $92,000 1,012,526 2,043,885
Inventories 2,538,192 2,713,439
Prepaid expenses and other 34,994 74,419
Refundable income taxes 371,000 371,000
Deferred income taxes (24,134) --
Due from joint venture 368,547 296,872
Land & building held for resale - net 544,291 548,167
-----------------------------
5,055,906 6,265,640
-----------------------------
PROPERTY AND EQUIPMENT:
Net 548,424 510,859
-----------------------------
OTHER ASSETS:
Investment in joint venture 83,064 94,906
Other 137,839 105,247
-----------------------------
220,903 200,153
-----------------------------
$ 5,825,233 $ 6,976,652
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
Page 3
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
- -------------------- March 31, 1998 December 31, 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to bank $ 1,672,142 $ 2,747,142
Notes payable to related party 550,000 550,000
Accounts payable 365,725 463,010
Accrued expenses 304,023 293,497
Due to joint venture -- --
Current maturities of long-term debt 681,191 693,688
-----------------------------
3,573,081 4,747,337
-----------------------------
LONG-TERM DEBT BANK: -- --
-----------------------------
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 974,313 974,313
Retained earnings 1,410,193 1,388,706
Treasury stock - 681,779 and 696,779
shares, at cost (131,084) (131,084)
Unearned compensation (9,450) (10,800)
-----------------------------
2,252,152 2,229,315
-----------------------------
$ 5,825,233 $ 6,976,652
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
Page 4
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
-------- --------
<S> <C> <C>
NET SALES $ 1,489,120 $ 2,486,907
COST OF SALES 914,610 1,680,832
-----------------------------
Gross profit 574,510 806,075
-----------------------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 578,840 971,662
-----------------------------
Operating income (4,330) (165,587)
INTEREST EXPENSE 72,267 78,748
EQUITY IN EARNINGS OF JOINT VENTURE 111,254 23,082
-----------------------------
Income before income taxes 34,657 (267,417)
PROVISION (CREDIT) FOR INCOME TAXES 13,170 (72,406)
-----------------------------
NET INCOME 21,487 (195,011)
-----------------------------
LOSS PER COMMON SHARE -- --
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,494,175
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
Page 5
DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 21,487 $ (5,739)
Adjustments to reconcile income (loss) to net cash
provided by (used in) by operating activities -
Depreciation and amortization (29,689) 101,763
Deferred income taxes 24,134 0
Amortization of unearned compensation 1,350 2,460
Change in assets and liabilities:
Decrease (increase) in accounts receivable 1,031,359 1,094,911
Decrease (increase) in inventories 175,247 (165,295)
Decrease (increase) in prepaid expenses and other 39,425 (33,636)
Increase (decrease) in accounts payable (97,285) 191,101
Increase (decrease) in accrued expenses 10,526 (43,245)
Decrease (increase) in due from joint venture (59,833) (46,207)
Decrease (increase) in other assets (32,592) (21,800)
-----------------------------
Cash provided (used) by operating activities 1,084,129 1,078,106
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditure (4,000) (89,703)
Cash used by investing activities (4,000) (89,703)
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (12,497) (12,501)
Increase (decrease) in notes payable (1,075,000) (1,210,000)
-----------------------------
Cash provided (used) by financing activities (1,087,497) (1,222,501)
-----------------------------
DECREASE IN CASH (7,368) (234,098)
-----------------------------
CASH, beginning of period 217,858 338,961
-----------------------------
CASH, end of period $ 210,490 $ 104,863
-----------------------------
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 112,385 $ 91,191
Income Taxes -- --
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
Page 6
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, 1997.
The financial information included herein at March 31,
1998 and for the three months ended March 31, 1998 and March 31, 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>
March 31, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Raw materials $ 575,893 $ 609,757
Work in process 244,387 252,156
Finished goods 1,717,912 1,851,526
---------- ----------
$2,538,192 $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.
<PAGE> 7
Page 7
NOTE 4 - ADJUSTMENTS
During the fourth quarter of 1997 the Company recorded an inventory adjustment
of $400,000. The financial statements for the quarter ended March 31, 1997 have
been restated to reflect the impact of this adjustment on the first quarter's
operating results. Accordingly, the 1997 pre-tax earnings for the first quarter
have been reduced by $258,160 and the net income for the first quarter was
reduced by $189,272.
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 book gain in excess of $200,000 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 March 31, 1998 increased to 1.4 compared
to 1.3 at December 31, 1997. Cash in bank decreased by $7,368 during the period.
Operating activities provided cash flow of $1,084,129 with income from
operations and non-cash adjustments providing $17,282. Changes in assets and
liabilities provided $ 1,066,847. The net increase related to assets and
liabilities was primarily due to significant reductions in accounts receivable
and inventory. These increases were partially offset by decreases in accounts
payable.
Financing activities used $ 1,087,497 due to repayments on notes payable and
long-term debt. At March 31, 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.
<PAGE> 8
Page 8
As of March 31, 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'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 March 31, 1998 as compared to the quarter ended
March 31, 1997 decreased $997,787 or 40.1%. Gross Margin increased to 38.6%
compared to 32.4% in 1997. The decrease in sales primarily relates to the
discontinuation of the unprofitable gift, floral and small customer accounts.
Selling, general and administrative expenses as a percent of sales for the first
quarter basically remained unchanged even with the significant decrease in total
sales; 38.9% in 1997 compared to 39.1% in 1996. Total selling, general, and
administrative expenses decreased 40% this year, from $971,662 in 1997 to
$578,840 in 1996. The primary reason for this reduction in costs is the
elimination of most expenses relating to the discontinued operation in Illinois.
Interest expense decreased by $6,481 as a result of lower average borrowing
levels in 1998 when compared to last year.
The Company's share of profits from its joint venture increased by $88,172 when
compared to 1997. This increase was caused by higher production levels in Mexico
in the first quarter of 1998, due to the transfer of most of the production from
the closed Illinois facility to the joint venture.
For the first quarter of 1998 the Company's pre tax income was $34,657 as
compared to the restated loss for 1997 of ($267,417). 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.
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.
<PAGE> 9
Page 9
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 15, 1998 /s/ Roger R. Tuttle
------------------------------------
(Signature) Roger R. Tuttle, Chairman of the
Board and Chief Executive Officer
Date: May 15, 1998 /s/ James M. Sablic
------------------------------------
(Signature) James M. Sablic, Treasurer,
(Principal Accounting and Financial
Officer)
<PAGE> 10
EXHIBIT INDEX
Ex. 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 210,490
<SECURITIES> 0
<RECEIVABLES> 1,104,526
<ALLOWANCES> 92,000
<INVENTORY> 2,538,192
<CURRENT-ASSETS> 5,055,906
<PP&E> 3,178,554
<DEPRECIATION> 2,630,130
<TOTAL-ASSETS> 5,825,233
<CURRENT-LIABILITIES> 3,573,081
<BONDS> 0
0
0
<COMMON> 8,180
<OTHER-SE> 2,243,972
<TOTAL-LIABILITY-AND-EQUITY> 5,825,233
<SALES> 1,489,120
<TOTAL-REVENUES> 1,489,120
<CGS> 914,610
<TOTAL-COSTS> 914,610
<OTHER-EXPENSES> 578,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,267
<INCOME-PRETAX> 34,657
<INCOME-TAX> 13,170
<INCOME-CONTINUING> 21,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,487
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
