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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: September 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
September 30, 1998 was 7,497,925.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
- ------
September 30, December 31,
1998 1997
---- ----
(Unaudited)
CURRENT ASSETS:
Cash $ (14,299) $ 217,858
Accounts receivable, less allowance
For doubtful accounts of $92,000 2,263,538 2,043,885
Inventories 2,148,075 2,713,439
Prepaid expenses and other 116,013 74,419
Refundable income taxes 35,025 371,000
Deferred tax assets ------ ------
Due from joint venture 430,783 296,872
Land & building held for resale - net ------- 548,167
---------- -----------
4,979,135 6,265,640
---------- -----------
PROPERTY AND EQUIPMENT
Net 368,170 510,859
---------- -----------
OTHER ASSETS:
Investment in joint venture 83,064 94,906
Other 104,047 105,247
---------- -----------
187,111 200,153
---------- -----------
$5,534,416 $ 6,976,652
---------- -----------
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND
STOCKHOLDERS' EQUITY Sept. 30, December 31,
1998 1997
--------- ----------
(Unaudited)
CURRENT LIABILITIES:
Notes payable bank $ 1,647,622 $ 2,747,142
Notes payable related party 588,959 550,000
Accounts payable 372,079 463,010
Accrued expenses 308,925 293,497
Current maturities of long-term debt 27,315 693,688
------------ -----------
$ 2,944,900 $ 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 1,751,357 1,388,706
Treasury stock - 681,779 and 696,779
shares, at cost (134,884) (140,084)
Unearned compensation ------- (10,800)
------------ -----------
2,589,516 2,220,315
------------ -----------
$ 5,534,416 $ 6,976,652
------------ -----------
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30,
1998 1997
---- ----
NET SALES $ 6,342,275 $ 7,360,997
COST OF GOODS SOLD 3,909,423 5,141,354
EQUITY IN EARNINGS OF JOINT VENTURE 406,918 96,158
----------- -----------
Gross profit 2,839,770 2,315,801
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,380,044 2,708,748
----------- -----------
Operating Income/(Loss) 459,726 (392,947)
INTEREST EXPENSE 205,697 246,643
GAIN ON SALE OF PROPERTY 284,652 -------
----------- -----------
Income/(Loss) before income
taxes 538,681 (639,590)
PROVISION FOR INCOME TAXES 176,030 (170,771)
----------- -----------
NET INCOME/(LOSS) $ 362,651 $ (468,819)
=========== ===========
INCOME/(LOSS) PER COMMON SHARE $ .05 $ (.06)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,497,925
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended Sept. 30
1998 1997
---- ----
NET SALES $2,669,713 $ 2,471,435
COST OF SALES 1,601,371 1,558,976
EQUITY IN EARNINGS OF JOINT VENTURE 134,692 35,185
---------- -----------
Gross profit 1,203,034 947,644
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 847,287 877,095
---------- -----------
Operating Income/(Loss) 355,747 70,549
INTEREST EXPENSE 87,403 90,972
GAIN ON SALE OF PROPERTY ---------- -----------
---------- -----------
Income/(Loss) before income taxes 268,344 (20,423)
PROVISION FOR INCOME TAXES 148,192 (5,453)
---------- -----------
NET INCOME/(LOSS) $ 120,152 $ (14,970)
========== ===========
INCOME/(LOSS) PER COMMON SHARE $ .02 $ (.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,497,925 7,497,925
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine months Ended September 30,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(Loss) $ 362,651 $ (468,819)
Adjustments to reconcile loss to net cash used
by operating activities -
Depreciation and amortization 198,212 319,814
Provision for losses on accounts receivable 27,241 3,539
Amortization of unearned compensation ----- 4,438
Change in assets and liabilities:
Increase in accounts receivable (219,643) 265,765
Decrease in inventories 565,364 388,564
Decrease in prepaid expenses and other 50,580 3,303
Decrease in accounts payable 90,931 51,537
Increase in accrued expenses 53,547 21,872
Increase in due to joint venture (133,911) (122,696)
Decrease (increase) in other assets 439,745 (80,582)
---------- -----------
Cash provided (used) by operating activities 1,072,066 386,735
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditure ( 80,000) 182,393)
Sale of land & building 117,000 ------
---------- -----------
Cash used by investing activities 37,000 182,393)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (684,113) (37,503)
Increase (decrease) in notes payable (1,060,561) (522,000)
Issue treasury stock 3,800 16,200
---------- -----------
Cash provided (used) by financing activities (1,740,874) ( 543,303)
DECREASE IN CASH ( 232,157) (338,961)
---------- -----------
CASH, beginning of period 217,858 338,961
---------- -----------
CASH, end of period $ (14,299) $ 0
---------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest $ 154,575 230,922
Income Taxes 88,710 -------
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 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 September 30, 1998 and for the
three months and nine months ended September 30, 1998 and September 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>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Raw materials and work in process $ 81,173 $ 609,757
Work in process 252,156
Finished goods 2,066,902 1,851,526
----------- -----------
$ 2,148,075 $ 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
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. 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 September 30, 1998 increased to 1.7 from
to 1.3 at December 31, 1997. Cash in bank decreased by $232,157 during the
period.
Operating activities provided cash flow of $1,072,066 with income from
operations and non-cash adjustments providing $(225,453). Changes in assets and
liabilities provided $846,613. 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 $ 1,740,874 due to repayments on notes payable and
long-term debt. Effective April 3,1998, the Company secured a line of credit
with a Texas bank with a maximum borrowing limit of $4,000,000.
As of September 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 September 30, 1998 as compared to the quarter
ended September 30, 1997 increased $198,278 or 8%. This increase in sales
primarily relates to the sports, and broadening of the customer base.
The gross margin percent increased to 44.8% as compared to 31.5% in 1997. This
was due to a greater portion of production being produced in Mexico.
The total selling, general and administrative expenses decreased 12% this year,
from $2,708,748 in 1997 to $2,380,044 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 $40,946 as a result of lower average borrowing
levels in 1998 when compared to last year, despite slightly higher interest
rate.
For the third quarter of 1998 the Company's pre-tax income was $268,344 as
compared to the restated loss for 1997 of $(20,423). 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.
Until May 1, 1998 there were fixed costs involved in maintaining the Broadview
facility as well as the employment of two employees. Just recently one of these
employees has relocated to Texas.
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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: October 26, 1998 /s/ ROGER R. TUTTLE
-----------------------------------------
(Signature) Roger R. Tuttle, Chairman of the
Board and Chief Executive Officer
<PAGE> 11
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 14,299
<SECURITIES> 0
<RECEIVABLES> 2,263,538
<ALLOWANCES> 92,000
<INVENTORY> 2,148,075
<CURRENT-ASSETS> 0
<PP&E> 368,170
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,534,416
<CURRENT-LIABILITIES> 2,944,900
<BONDS> 0
0
0
<COMMON> 8,180
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,534,416
<SALES> 6,342,275
<TOTAL-REVENUES> 6,342,275
<CGS> 3,502,505
<TOTAL-COSTS> 2,380,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 538,681
<INCOME-TAX> 176,030
<INCOME-CONTINUING> 254,029
<DISCONTINUED> 284,652
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362,651
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
