UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from to
Commission File Number 33-55254-03
DYNAMIC ASSOCIATES, INC.
(Exact name of Small Business Issuer as specified in its charter)
Nevada 87-0473323
(State or other jurisdiction of (IRS Employer
incorporation ) Identification No.)
7373 North Scottsdale Road, Suite B-169
Scottsdale, Arizona 85253
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602) 483-8700
Indicate by a check mark whether the issuer (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
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of September 30, 1997
- ------------------------------------ ------------------------------------
$.001 par value Class A Common Stock 13,875,929 shares
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BASIS OF PRESENTATION
General
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and, therefore, do not include
all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders' equity in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the nine
months ended September 30, 1997, are not necessarily indicative of the results
that can be expected for the year ending December 31, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company is engaged in (i) the development and acquisition of microwave
technologies for medical purposes through MMC, a wholly owned subsidiary, (ii)
managing the operations of psychiatric/geriatric units for various hospitals
through Genesis and GCCA, wholly owned subsidiaries, and (iii) the manufacturing
of highly technologically advanced microwave components and subsystems for the
communications and aerospace industries through P&H, a wholly owned subsidiary.
The Company acquired the remaining 50% of P&H Laboratories on September 26, 1997
for 214,287 shares of its common stock valued at $3.50 per share. Now a wholly
owned subsidiary, P&H Laboratories will provide the special technical support
needed for Microwave Medical Corporation to commercialize its proprietary
microwave medical device products.
On October 10th, 1997 the Board of Directors of the Company approved the
"spin-off" of two of its subsidiaries, Microwave Medical Corporation and P&H
Laboratories, (to be combined as one company). The Company plans to proceed with
the spin-off in an expedited manner.
The following Pro Forma table reflects the spin-off as if it occurred January 1,
1997 and shows the operations of the two separate entities for the nine months
ending September 30, 1997. The Pro Forma reflects a cost savings of $1,000,000
in management fees that will be achieved by removing the overhead of the Parent
Company. This management fee is used in part to pay the interest on the 10%
Convertible Notes which will total $2,023,784 in 1997. After the spin-off
Dynamic / Genesis will be responsible for the interest payments. No income tax
calculations are included.
2
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Nine Months ended September 30, 1997
<TABLE>
<CAPTION>
SUBSIDIARIES
Health Care Hi-Tech
------------------ ------------------
Consolidated Pro Forma
----------------------------------------
<S> <C> <C>
Net sales $ 0 $ 2,670,511
Management fees 11,193,175 0
Cost of sales 0 2,046,345
------------------ ------------------
GROSS PROFIT 11,193,175 624,166
Selling and general and administrative
expenses 6,680,488 569,954
Depreciation and amortization 50,895 65,503
Research and development 0 588,888
------------------ ------------------
6,731,383 1,224,345
------------------ ------------------
NET OPERATING INCOME (LOSS) 4,461,792 (600,179)
OTHER INCOME (EXPENSE)
Interest income 8,336 21,710
Interest expense (6,228) (8,781)
Loss on disposition (2,138) 0
Miscellaneous income 1,172 29,550
------------------ ------------------
1,142 42,479
------------------ ------------------
NET INCOME (LOSS) BEFORE
INCOME TAXES $ 4,462,934 $ (557,700)
================== ==================
</TABLE>
3
<PAGE>
The Company's Annual General Meeting was held on October 10th, 1997. The
Shareholders approved
1. The election of the directors naming Jan Wallace, Florian Homm, William
Means and Elliot Smith. Mr. Herb Capozzi and Mr. Logan Anderson had
declined the nominations to stand as directors.
2. To amend the Articles of Incorporation providing for the full
indemnification of the officers, directors and agents of the Company, under
Nevada law.
3. The 1997 Stock Option Plan, with amendments.
4. The appointment of Smith & Company as independent auditors for the Company.
5. The Amended Bylaws of the Company.
No other business was transacted at the meeting and the meeting was adjourned.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had $3,072,519 in cash and cash
equivalents. The Company generated a loss of $.11 per share for the nine month
period ending September 30, 1997 after deducting $144,629 for amortization of
debt costs, $1,997,607 for depreciation and amortization, and $385,947 for an
unrealized decline in investments. The cost of depreciation, goodwill, debt cost
amortization and the unrealized decline in investments is approximately $.20 per
share. Cash flow generated from operations was approximately $.05 per share.
The Company through its wholly owned subsidiary, P&H Laboratories, operates in
the industry of manufacturing highly technologically advanced microwave
components and subsystems for the communications and aerospace industries. P&H
expects to generate sufficient funds for working capital for the next quarter.
The Company also is engaged in the acquisition and development of microwave
technologies for medical purposes through its subsidiary Microwave Medical
Corporation. This subsidiary has not yet had any sales and for the next quarter
will be dependent on the Company for operating expenses.
Genesis, a Louisiana corporation, is a 100% owned subsidiary of the Company. It
provides elderly healthcare and gero-psychology services to small healthcare
facilities unable to provide these services in house. The Genesis treatment
program conforms to the guidelines of the JCAHO Accreditation Manual for
Hospitals and Medical Standards. The program is reimbursed at cost by Medicare
when established as a distinct part unit of a hospital which qualifies for an
exemption from the Medicare Prospective Payment System("PPS"). The PPS exemption
provides for a cost plus reimbursement system for the unit, which allows the
hospital to receive full reimbursement of the direct operating expenses, plus an
allocation to the unit of a substantial portion of the hospital's overall
overhead and capital costs. Genesis , together with GCCA, expects to generate a
profit.
4
<PAGE>
Item 5. Other Information.
Microwave Medical Corporation (MMC)
The Company's wholly owned subsidiary Microwave Medical Corporation ("MMC"),
formerly Microthermia Acquisition Corporation, entered into a license agreement
with Microthermia Technology, Inc. (of California), whereby MMC obtained an
exclusive license to develop and manufacture medical device products related to
the treatment of spider veins (telangiectasia). The license is for an initial
period of two years with automatic one year renewals for the next eight years,
at no cost, (total license period of 10 years). The license is prepaid for the
first two years, however, the Company does not intend to use this technology at
the present time. The Company is independently developing a platform of
proprietary and patentable microwave technologies for the treatment of various
medical conditions. MMC is currently testing and evaluating microwave equipment
it has developed for the permanent removal of hair and a second device to be
used for the treatment of spider veins (telangiectasia).
P&H Laboratories (P&H)
On April 23,1996, the Company acquired 50% of the outstanding common stock of
P&H, a California corporation, for $1,000,000, together with an exclusive two
year option expiring on April 23, 1998 to acquire the remaining 50% of P&H for
an additional $1,000,000. P&H is a modern microwave component designer and
manufacturer located in Simi Valley, California. Devices produced at P&H are
currently being used on most NASA and military satellites, as well as
communications satellites throughout the world.
Genesis Health Management Corporation (Genesis)
In December 1996, the Company purchased 100% of the outstanding common stock of
Genesis for $25,373,000. Of the purchase price, $15,050,000 was paid in cash or
notes and accounts payable and $10,323,000 was paid by issuing 3,100,000 shares
of the Common Stock of the Company at a value of $3.33 per share. The note
issued in connection with the acquisition of Genesis was paid in full on March
3, 1997. Genesis had been operating in Louisiana for 3 years prior to the
purchase by the Company. Genesis is in the business of managing and operating
psychiatric/geriatric units in various hospitals (both in-patient and
out-patient). Genesis has contracts with hospitals in the states of Louisiana,
Arkansas, Mississippi and Tennessee. At September 30, 1997, Genesis had billings
to 23 units.
Geriatric Care Centers of America, Inc. (GCCA)
On March 13, 1997, Geriatric Care Centers of America ("Geriatric"), a
corporation organized pursuant to the laws of the state of Tennessee, merged
with Geriatric Care Centers Acquisition Corporation, for $500,000 in cash and
150,000 shares of Common Stock of the Company. The surviving corporation is
Geriatric Care Centers of America, Inc. ("GCCA"), with its registered office at
1613 Jimmie Davis Highway, Bossier City, Louisiana, 71112. The Company owns 100%
of GCCA. GCCA is also in the business of managing and operating
psychiatric/geriatric units in hospitals. At September 30, 1997, GCCA had 4
operating units. The financial statements at September 30, 1997 do not include
any income or expenses for GCCA for the first quarter of 1997, as it was
acquired late in the quarter.
5
<PAGE>
RESULTS OF OPERATIONS
The financial statements present the combined activities of the Company,
Genesis, Geriatric, MMC and P&H.
During the nine months ended September 30, 1997, management fees of $320,000
were paid or accrued compared to $319,500 for the same period in 1996. The
Company's President received $100,000 and other consultants received $220,000.
Net loss for the nine months ended September 30, 1997 was $1,395,005 compared to
a loss of $1,208,647 for the same period in 1996. The net loss is $.11 per share
for the nine months. A charge for amortization of goodwill and debt cost and
depreciation of $2,142,236 and an Unrealized Decline in Investment of $385,947
was incurred in the period which represents $.20 per share. The Company
generated from operations a positive cash flow of $.05 per share.
Net sales for the nine months ended September 30, 1997 were $2,670,511 compared
to $2,374,162 for the same period in 1996. Management fee income earned by
Genesis and Geriatric was $10,949,050 for the nine months ended September 30,
1997 compared to $0 for the same period in 1996. The management fee income is
$11,193,175 when Geriatric's pre-acquisition income is included.
Cost of sales for the nine months ended September 30, 1997 was $2,046,345
compared to $1,689,841 for the same period in 1996. Cost of sales relate to
operations at P & H.
Selling and general and administrative expenses for the nine months ended
September 30, 1997 were $8,281,035 compared to $1,335,816 for the same period in
1996. The large increase corresponds to administrative cost related to the
acquisitions.
Research and development expenses incurred by MMC were $588,888 for the nine
months ended September 30, 1997 compared to $425,039 for the same period in
1996.
Depreciation and amortization expenses for the nine months ended September 30,
1997 were $1,997,607 compared to $43,614 for the same period in 1996. This
increase is mainly due to the amortization of goodwill.
Interest expense for the nine months ended September 30, 1997 was $1,535,561
compared with $79,295 for the same period in 1996. The substantial increase is
mainly associated with the convertible notes and also includes $144,629 of
amortized debt issue costs.
Net loss for the three months ended September 30, 1997 was $627,877 compared to
a loss of $538,788 for the same period in 1996. The net loss is $.05 per share
for the quarter. A charge for amortization of goodwill and debt cost and
depreciation of $717,241 and a charge for Unrealized Decline in Investment of
$367,972 was incurred in the period which represents $.08 per share. The Company
generated from operations a positive cash flow of $.03 per share.
Net sales for the three months ended September 30, 1997 were $902,708 compared
to $924,511 for the same period in 1996. Management fee income earned by Genesis
and Geriatric was $3,839,650 for the three months ended September 30, 1997
compared to $0 for the same period in 1996.
6
<PAGE>
Cost of sales for the three months ended September 30, 1997 was $732,881
compared to $663,596 for the same period in 1996. Cost of sales relate to P & H.
Selling and general and administrative expenses for the three months ended
September 30, 1997 were $2,881,190 compared to $511,766 for the same period in
1996. The large increase corresponds with the increase in sales from the
acquisitions made.
Research and development expenses incurred by MMC were $155,783 for the three
months ended September 30, 1997 compared to $182,823 for the same period in
1996.
Depreciation and amortization expenses for the three months ended September 30,
1997 were $669,031 compared to $17,219 for the same period in 1996. This
increase is mainly due to the amortization of goodwill.
Interest expense for the three months ended September 30, 1997 was $532,627
compared with $44,490 for the same period in 1996. The substantial increase is
mainly associated with the convertible notes.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
99-1 Financial Statements as of September 30, 1997
Financial Data Schedule
(b) Reports on Form 8-K
None.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: November 18, 1997 /S/ Jan Wallace
Jan Wallace, President
8
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1997
----------------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 2,964,106
Short-term commercial paper 108,413
Accounts receivable (less allowance for doubtful accounts of $759,925) 4,059,853
Loans receivable - related parties 52,500
Other receivables 111,585
Inventories 671,335
Prepaid expense and other current assets 85,352
Deferred Tax Benefit 388,000
----------------------
TOTAL CURRENT ASSETS 8,441,144
PROPERTY, PLANT & EQUIPMENT 823,266
OTHER ASSETS
Deferred debt issue costs 1,719,439
Investment - restricted stock 27,100
Deferred Tax Benefit 463,000
Goodwill 22,776,375
Deposits 136,504
Organization Costs 700
----------------------
25,123,118
----------------------
$ 34,387,528
======================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts payable $ 599,831
Accrued expenses 485,997
Current portion of long-term debt 57,311
Income taxes payable 219,404
Accrued interest payable 396,164
----------------------
TOTAL CURRENT LIABILITIES 1,758,707
LONG-TERM DEBT 200,349
CONVERTIBLE NOTES 17,001,500
DEPOSITS 20,000
DEFERRED INCOME TAX 55,500
----------------------
17,277,349
----------------------
TOTAL LIABILITIES 19,036,056
STOCKHOLDERS' EQUITY Common stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding 13,875,929 shares 13,876
Additional paid-in capital 18,309,889
Retained deficit (2,972,293)
----------------------
TOTAL STOCKHOLDERS' EQUITY 15,351,472
----------------------
$ 34,387,528
======================
</TABLE>
F-1
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 902,708 $ 924,511 $ 2,670,511 $ 2,374,162
Management fees 3,839,650 0 10,949,050 0
Cost of sales 732,881 663,596 2,046,345 1,689,841
------------- ------------- ------------- -------------
GROSS PROFIT 4,009,477 260,915 11,573,216 684,321
Selling and General and Administrative expenses 2,881,190 511,766 8,281,035 1,335,816
Depreciation and amortization 669,031 17,219 1,997,607 43,614
Research and development 155,783 182,823 588,888 425,039
------------- ------------- ------------- -------------
3,706,004 711,808 10,867,530 1,804,469
------------- ------------- ------------- -------------
NET OPERATING INCOME (LOSS) 303,473 (450,893) 705,686 (1,120,148)
OTHER INCOME (EXPENSE)
Interest income (13,825) 9,944 61,248 87,307
Interest expense (532,627) (44,490) (1,535,561) (79,295)
Unrealized decline in investment (367,972) 0 (385,947) 0
Loss on disposition 0 0 (2,138) 0
Miscellaneous income 26,773 9,038 30,819 11,548
Miscellaneous expense (2,367) (4,430) (2,367) (4,430)
------------- ------------- ------------- -------------
(890,018) (29,938) (1,833,946) 15,130
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST (586,545) (480,831) (1,128,260) (1,105,018)
INCOME TAX EXPENSE (BENEFIT) 64,959 34,700 266,745 52,500
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST (651,504) (515,531) (1,395,005) (1,157,518)
MINORITY INTEREST (INCOME) (23,627) 23,257 0 51,129
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (627,877) $ (538,788) $ (1,395,005) $ (1,208,647)
============= ============= ============= =============
Net income (loss) per weighted
average share $ (.05) $ (.06) $ (.11) $ (.15)
============= ============= ============= =============
Weighted average number of common
shares used to compute net income
(loss) per weighted average share 13,710,328 8,574,294 12,763,274 7,869,877
============= ============= ============= =============
</TABLE>
F-2
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
Par Value $.001 Paid-In Retained
Shares Amount Capital Deficit
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Balances at 12/31/96 12,158,900 $ 12,159 $ 14,765,238 $ (1,577,288)
Sale of common stock (S-8)
at $1.00 per share 924,600 925 923,675
Issuance of common stock
(restricted) at $2.00 per
share for subsidiary
(Geriatric) 150,000 150 299,850
Issuance of common stock
(Reg S) to retire debt 428,142 428 1,498,072
Issuance of common stock
(restricted) at $3.50 per
share for remaining 50%
of subsidiary (P & H) 214,287 214 749,786
Capital raising and
subsidiary costs (16,327)
Minority interest adjustment 89,595
Net loss for period (1,395,005)
----------------- ------------------ ------------------ -----------------
Balances at 9/30/97 13,875,929 $ 13,876 $ 18,309,889 $ (2,972,293)
================= ================== ================== =================
</TABLE>
F-3
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
9/30/97 9/30/96
----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (1,395,005) $ (1,208,647)
Adjustments to reconcile net income (loss) to cash provided (used) by
operating activities:
Depreciation & amortization 2,142,236 43,614
Net book value of assets sold 2,138 0
Adjustment for investment received as interest income (15,000) 0
Unrealized decrease in investment 385,947 0
Minority interest 0 51,130
Deferred income tax 5,000 (5,000)
Stock received for interest 0 (50,000)
Changes in assets and liabilities:
Accounts receivable (1,745,890) 213,333
Inventories 46,492 (269,659)
Prepaid expenses 39,758 (1,739)
Accounts payable and accrued expenses (440,331) 90,590
Income taxes payable 129,544 (109,898)
Deposits 20,000 0
----------------- -----------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (825,111) (1,246,276)
INVESTING ACTIVITIES
Loans to related party and accrued interest 90,246 78,602
Loan - other 0 (92,953)
Purchase of equipment (496,999) (136,619)
Refund of option 0 30,000
Deposits (113,467) (501,312)
Goodwill (500,000) 0
Purchase of subsidiary 0 (1,000,000)
----------------- -----------------
NET CASH USED BY INVESTING ACTIVITIES (1,020,220) (1,622,282)
FINANCING ACTIVITIES
Deferred debt issue costs (340,356) 0
Cash from subsidiary 41,518 0
Principal payments on debt (3,279,952) (281,733)
Capital raising costs (3,000) 0
Convertible note proceeds 3,996,000 0
Loan proceeds 132,021 0
Proceeds from sale of common stock 924,600 2,714,374
----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,470,831 2,432,641
----------------- -----------------
(DECREASE) IN CASH AND CASH EQUIVALENTS (374,500) (435,917)
Cash and cash equivalents at beginning of year 3,447,019 1,289,000
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,072,519 $ 853,083
================= =================
SUPPLEMENTAL INFORMATION Cash paid for:
Interest $ 1,034,306 $ 39,425
Income taxes 132,210 168,590
</TABLE>
F-4
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Nine months ended September 30, 1997
<TABLE>
<CAPTION>
Pro Forma Consolidated
Dynamic Geriatric (1) Adjustments Pro Forma
--------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Net Sales $ 2,670,511 $ 0 $ $ 2,670,511
Management fee income 10,949,050 244,125 11,193,175
Cost of sales 2,046,345 0 2,046,345
--------------- --------------- --------------- ---------------
GROSS PROFIT 11,573,216 244,125 11,817,341
Selling and general and administrative expenses 8,281,035 26,792 8,307,827
Depreciation and amortization 1,997,607 0 1,997,607
Research and development 588,888 0 588,888
--------------- --------------- --------------- ---------------
10,867,530 26,792 10,894,322
--------------- --------------- ---------------
NET OPERATING INCOME 705,686 217,333 923,019
OTHER INCOME (EXPENSE)
Interest income 61,248 0 61,248
Interest expense (1,535,561) 0 (1,535,561)
Unrealized decline in investment (385,947) 0 (385,947)
Loss on disposition (2,138) 0 (2,138)
Miscellaneous income 30,819 0 30,819
Miscellaneous expense (2,367) 0 (2,367)
--------------- --------------- --------------- ---------------
(1,833,946) 0 (1,833,946)
--------------- --------------- ---------------
NET INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTEREST (1,128,260) 217,333 (910,927)
INCOME TAX EXPENSE 266,745 13,000 279,745
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST (1,395,005) 204,333 (1,190,672)
MINORITY INTEREST 0 0 0
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (1,395,005) $ 204,333 $ $ (1,190,672)
=============== =============== =============== ===============
Net income (loss) per weighted average share $ (.11) $ (.09)
=============== ===============
Weighted average number of common shares
used to compute net income (loss) per weighted
average share 12,763,274 12,763,274
=============== ===============
</TABLE>
(1) First quarter activity
F-5
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Nine months ended September 30, 1996
<TABLE>
<CAPTION>
Pro Forma Consolidated
Dynamic (1) Genesis Adjustments Pro Forma
--------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Net sales $ 2,374,162 $ 0 $ $ 2,374,162
Management fees 0 6,235,860 6,235,860
Cost of sales 1,689,841 0 1,689,841
--------------- --------------- --------------- ---------------
GROSS PROFIT 684,321 6,235,860 6,920,181
Selling and general and administrative
expenses 1,335,816 3,974,776 5,310,592
Depreciation and amortization 43,614 36,614 80,228
Research and development 425,039 0 425,039
--------------- --------------- --------------- ---------------
1,804,469 4,011,390 5,815,859
--------------- --------------- ---------------
NET OPERATING INCOME (LOSS) (1,120,148) 2,224,470 1,104,322
OTHER INCOME (EXPENSE)
Interest income 87,307 0 87,307
Interest expense (79,295) (12,448) (91,743)
Loss on disposition 0 (14,253) (14,253)
Miscellaneous income 11,548 426 11,974
Miscellaneous expense (4,430) 0 (4,430)
--------------- --------------- --------------- ---------------
15,130 (26,275) (11,145)
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) BEFORE
INCOME TAXES AND
MINORITY INTEREST (1,105,018) 2,198,195 1,093,177
INCOME TAX EXPENSE 52,500 1,284 53,784
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST (1,157,518) 2,196,911 1,039,393
MINORITY INTEREST 51,129 0 51,129
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (1,208,647) $ 2,196,911 $ $ 988,264
=============== =============== =============== ===============
Net income (loss) per weighted
average share $ (.15) $ (.09)
=============== ===============
Weighted average number of
common shares used to
compute net income (loss)
per weighted average share 7,869,877 11,119,877
=============== ===============
</TABLE>
(1) Includes the activities of Microwave Medical and P & H
F-6
<PAGE>
DYNAMIC ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
Quarter ended September 30, 1996
<TABLE>
<CAPTION>
Pro Forma Consolidated
Dynamic (1) Genesis Adjustments Pro Forma
--------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Net sales $ 924,511 $ 0 $ $ 924,511
Management fees 0 2,356,215 2,356,215
Cost of sales 663,596 0 663,596
--------------- --------------- --------------- ---------------
GROSS PROFIT 260,915 2,356,215 2,617,130
Selling and general and administrative
expenses 511,766 1,520,400 2,032,166
Depreciation and amortization 17,219 12,127 29,346
Research and development 182,823 0 182,823
--------------- --------------- --------------- ---------------
711,808 1,532,527 2,244,335
--------------- --------------- ---------------
NET OPERATING INCOME (LOSS) (450,893) 823,688 372,795
OTHER INCOME (EXPENSE)
Interest income 9,944 0 9,944
Interest expense (44,490) (3,304) (47,794)
Loss on disposition 0 (12,503) (12,503)
Miscellaneous income 9,038 0 9,038
Miscellaneous expense (4,430) 0 (4,430)
--------------- --------------- --------------- ---------------
(29,938) (15,807) (45,745)
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) BEFORE
INCOME TAXES AND
MINORITY INTEREST (480,831) 807,881 372,050
INCOME TAX EXPENSE
(BENEFIT) 34,700 0 34,700
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST (515,531) 807,881 292,350
MINORITY INTEREST 23,257 0 23,257
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (538,788) $ 807,881 $ $ 269,093
=============== =============== =============== ===============
Net income (loss) per weighted
average share $ (.06) $ .02
=============== ===============
Weighted average number of
common shares used to
compute net income (loss)
per weighted average share 8,574,294 11,824,294
=============== ===============
</TABLE>
(1) Includes the activities of Microwave Medical and P & H
F-7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Dynamic Associates, Inc. and Subsidiaries September 30, 1997 financial
statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000878146
<NAME> Dynamic Associates, Inc.
<S>
<C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,072,519
<SECURITIES> 0
<RECEIVABLES> 4,819,778
<ALLOWANCES> (759,925)
<INVENTORY> 671,335
<CURRENT-ASSETS> 8,441,144
<PP&E> 2,431,508
<DEPRECIATION> (1,608,242)
<TOTAL-ASSETS> 34,387,528
<CURRENT-LIABILITIES> 1,758,707
<BONDS> 17,001,500
0
0
<COMMON> 13,876
<OTHER-SE> 15,337,596
<TOTAL-LIABILITY-AND-EQUITY> 34,387,528
<SALES> 2,670,511
<TOTAL-REVENUES> 13,619,561
<CGS> 2,046,345
<TOTAL-COSTS> 2,046,345
<OTHER-EXPENSES> 10,867,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,535,561
<INCOME-PRETAX> (1,128,260)
<INCOME-TAX> 266,745
<INCOME-CONTINUING> 705,686
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,395,005)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
