SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-8161
DIONICS, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
DELAWARE 11-2166744
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
65 RUSHMORE STREET
WESTBURY, NEW YORK 11590
(Address of Principal Executive Offices)
(516) 997-7474
(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
Yes X No
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
Common, $.01 par value per share: 3,483,678
outstanding as of November 1, 1995
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended September 30, 1995
ITEM PAGE HEREIN
Item 1 - Financial Statements:
Introductory Comments
Condensed Balance Sheet
Condensed Statement of Operations
Statement of Cash Flows
Notes to Financial Statements
Item 2 - Management's Discussion and
Analysis or Plan of Operation
<PAGE>
DIONICS, INC.
SEPTEMBER 30, 1995
The financial information herein is unaudited. However, in the
opinion of management, such information reflects all adjustments
(consisting only of normal recurring accruals) necessary to a fair
presentation of the results of operations for the periods being reported.
Additionally, it should be noted that the accompanying condensed financial
statements do not purport to be complete disclosures in conformity with
generally accepted accounting principles.
The results of operations for the nine and three months ended
September 30, 1995 are not necessarily indicative of the results of
operations for the full fiscal year ended December 31, 1995.
These condensed statements should be read in conjunction with the
Company's financial statements for the year ended December 31, 1994.
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
A S S E T S
CURRENT ASSETS:
Cash $ 86,600 $ 84,900
Accounts Receivable Trade
(Less Estimated Doubtful
Accounts of $5,000 in 1995
and $5,000 in 1994) Note 3 188,500 236,500
Inventory - Notes 1 and 3 374,700 298,300
Prepaid Expenses and Other-
Current Assets 16,900 29,600
Total Current Assets 666,700 649,300
PROPERTY, PLANT AND
EQUIPMENT - Note 3
(At Cost Less Accumulated
Depreciation of
$1,577,200 in 1995 and
$1,526,100 in 1994) 106,700 157,800
DEPOSITS AND OTHER ASSETS -
Note 2 27,400 29,000
Total $ 800,800 $ 836,100
</TABLE>
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
L I A B I L I T I E S
CURRENT LIABILITIES:
Current Portion of Long-Term
Debt - (Note 3) $ 15,000 $ 18,200
Accounts Payable 64,300 75,900
Accrued Expenses 25,800 49,400
Total Current Liabilities 105,100 143,500
Deferred Interest Payable 39,600 21,000
Deferred Compensation Payable -
(Note 2) 372,700 332,600
Long-Term Debt Less Current -
Maturities - (Note 3) 1,033,900 1,033,900
Total Liabilities 1,551,300 1,531,000
CONTINGENCIES AND COMMENTS
SHAREHOLDERS' EQUITY
Common Shares - $.01 Par Value
Authorized 5,000,000 Shares
Issued 3,648,222 Shares in
1995 and 3,648,222 in 1994 36,400 36,400
Additional Paid-in Capital 1,522,800 1,522,800
(Deficit) (2,089,100) (2,033,500)
(529,900) (474,300)
Less: Treasury Stock at Cost
164,544 Shares in 1995 and
164,544 Shares in 1994 (220,600) (220,600)
Total Shareholder's Equity
(Deficit) (750,500) (694,900)
Total $ 800,800 $ 836,100
</TABLE>
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SALES $ 341,300 $ 341,800
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 255,900 260,100
Selling, General and
Administrative Expenses 72,100 85,200
Total Costs and Expenses 328,000 348,300
NET INCOME (LOSS) FROM
OPERATIONS 13,300 (6,500)
INTEREST AND OTHER INCOME 900 200
14,200 (6,300)
INTEREST EXPENSE 23,700 22,400
NET (LOSS) FOR THE PERIOD
BEFORE EXTRAORDINARY ITEMS (9,500) (28,700)
EXTRAORDINARY ITEMS:
Forgiveness of Indedtedness -0- 33,700
NET PROFIT (LOSS) FOR THE
PERIOD $ (9,500) $ 5,000
NET PROFIT (LOSS) PER SHARE:
From Operations $ (.003) $ (.008)
From Extraordinary Items -0- .009
Total Per Share $ (.003) $ .001
Average Number of Shares
Outstanding Used in
Computation of Per Share
(Loss) 3,483,678 3,483,678
</TABLE>
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SALES $ 946,200 $ 942,900
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 709,600 731,200
Selling, General and
Administrative Expenses 225,700 250,000
Total Costs and Expenses 935,300 981,200
NET INCOME (LOSS) FROM
OPERATIONS 10,900 (38,300)
INTEREST AND OTHER INCOME 3,000 1,200
13,900 (37,100)
INTEREST EXPENSE 69,500 54,700
NET (LOSS) FOR THE PERIOD
BEFORE EXTRAORDINARY ITEMS (55,600) (91,800)
EXTRAORDINARY ITEMS:
Forgiveness of Indebtedness -0- 33,700
NET (LOSS) FOR THE PERIOD $(55,600) $(58,100)
NET PROFIT (LOSS) PER SHARE:
From Operations $ (.016) $ (.026)
From Extraordinary Items -0- .009
Total Per Share $ (.016) $ (.017)
Average Number of Shares
Outstanding Used in
Computation of Per Share
(Loss) 3,483,678 3,483,678
</TABLE>
<PAGE>
DIONICS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (55,600)
Adjustment to Reconcile Net (Loss)
to Net Cash Used for Operating
Activities:
Depreciation and Amortization 51,100
Deferred Compensation and Interest 58,700
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable 48,000
(Increase) Decrease in Inventory (76,400)
(Increase) Decrease in Prepaid
Expenses and Other Current Assets 12,700
(Increase) Decrease in Deposits and
Other Assets 1,600
Increase (Decrease) in Accounts
Payable (11,600)
Increase (Decrease) in Accrued
Expenses (23,600)
Net Cash provided from Operating
Activities 4,900
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Repayment of Debt (3,200)
NET INCREASE IN CASH 1,700
CASH - Beginning of Year 84,900
CASH - End of Year $ 86,600
</TABLE>
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - INVENTORY:
Inventory is stated at the lower of cost (which represents cost
of materials and manufacturing costs on a first-in, first-out
basis) or market, and are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
FINISHED GOODS $ 32,200 $ 11,900
WORK-IN-PROCESS 245,300 201,200
RAW MATERIALS 52,400 44,700
MANUFACTURING SUPPLIES 44,800 40,500
Total $374,700 $298,300
</TABLE>
NOTE 2 - DEFERRED COMPENSATION PAYABLE:
In 1987 the company entered into an agreement with its chief
executive officer which provided for payments to him commencing
with the year in which he reaches the age 65, provided that the
officer does not voluntarily terminate his employment prior to
attaining age 65. Such agreement further provides that in the
event of death or if the company terminates the employment of the
officer prior to age 65 such payments are to commence during the
month subsequent to such event.
The company has an insurance policy on the life of the
aforementioned officer in an amount sufficient to fund the death
benefits described above. At December 31, 1994 the cash surrender
value on the existing policy approximated $4,300 and is included
in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 3 - LOANS PAYABLE - APPLE BANK:
Effective as of January 31, 1994, the Company and Apple Bank for
Savings (the "Bank") entered into a Restructuring Agreement
whereby the Bank agreed to forgive a portion of existing
indebtedness of the Company and to restructure the balance. In
October 1988, the Company had obtained from the Bank a Commercial
Equity Line in the original principal amount of $1 million (the
"Original Mortgage") and in 1990 the Company had obtained certain
other asset-based loans from the bank in the principal amount of
$283,850 (the "1990 Loans"). Pursuant to the Restructuring
Agreement,
A. The bank has forgiven $376,146.59 of accrued and unpaid
interest stemming from the Original Mortgage and the 1990 Loans.
B. The 1990 Loans have been replaced by a new term loan in
the principal amount of $283,850, ("Term Loan A")structured over
two five-year periods. During the first five-year period, the
Company will pay interest only, computed at an annual rate of 6.0
percent. Of that Amount, only one-third (2.0 percent) will be
payable monthly, with the remainder accruing and becoming part of
unpaid principal at the end of that period. During the second
five-year period, the balance due will be repaid over 60 equal
monthly installments, plus interest at Prime plus two percent on
the unpaid balance.
C. The remaining balance of $750,000 outstanding on the
Original Mortgage Loan has been replaced by a new $415,000
Mortgage Loan plus two additional Term Loans of $167,500 each.
These are treated as follows:
The new $415,000 Mortgage Loan ("Mortgage Loan B") has a five-year
term and carries an annual interest rate of 7.5 percent. For the
first two years of Mortgage Loan B, the Company is obligated to
make payments of interest only, on a monthly basis. Thereafter,
monthly payments will include interest plus the amount of
$1,921.30 towards reduction of debt. At the end of the five-year
period, the then-remaining principal ($347,754.50) will be due.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 3 - LOANS PAYABLE - APPLE BANK - (Continued)
The first new Term Loan ("Term Loan C") stemming from the
Original Mortgage has a face amount of $167,500 and carries the
same interest rate and payment terms over two five-year periods
as the new $283,850 Term Loan A described in Paragraph B above.
The second new Term Loan ("Term Loan D") stemming from the
Original Mortgage also has a face amount of $167,500, but carries
an annual interest rate of 4.0 percent, none of which is payable
during the initial five-year period. This interest will accrue
and will be added to the principal at the end of the first five-
year period. The new total balance due will be repaid over the
second five-year period with 60 equal monthly installments
plus interest of Prime plus two percent on the unpaid balance.
D. Term Loans A and C also carry convertibility rights
under which the Bank may, at its sole discretion, exchange debt
for Common Stock in the Company at prices ranging from $.75 per
share up to $1.25 per share, depending on the date of such
conversion, provided, however, that the aggregate number of
shares that the Bank may acquire will not exceed 15 percent of
the number of then outstanding shares of the Company's Common
Stock, subject to certain anti-dilution rights.
E. Contingent upon the Company achieving certain financial
performance levels during 1994 and 1995, the Bank has agreed to
forgive, at the end of the first five-year period, all of the
principal of and accrued interest on Term Loan D, as well as all
the deferred interest accrued on Term Loans A and C.
All the Company's Assets are pledged to the foregoing loans.
In September 1994, the Company was advised that the
foregoing loans were purchased from the Bank by D.A.N. Joint
Venture, a Limited Partnership, an affiliate of the Cadle
Company.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
A. LIQUIDITY AND CAPITAL RESOURCES
Unprofitable operations over the last several years have caused a
significant drain on liquid assets. The Company consumed the proceeds of a
1988 real estate line of credit for one million dollars as well as a 1990
loan of $283,850 against Accounts Receivable and other assets. The
Company's inability to make payments of either interest or principal had
placed both loans in a non-performing default status for almost three
years.
In July of 1993, the Company sold one of its two buildings and then
paid the Bank $250,000 against the one-million dollar real estate loan,
thus reducing the balance owed to $750,000. With some measure of
difficulty and expense, the Company consolidated operations into its one
remaining building. Next, Management set about negotiating with the Bank
for a thorough restructuring of all remaining debt. The process was
successfully completed with the signing of a "RESTRUCTURING AGREEMENT
between DIONICS, INC. and APPLE BANK FOR SAVINGS," effective January 31,
1994. The previous default status was thus cured, an amount of $376,146.59
in past due interest was forgiven, and numerous other favorable changes
were made to the debt and payment obligations of the Company. (See Note 3
of the Financial Statement for a description of the Restructuring
Agreement.) For purposes of this discussion, however, it is fair to
summarize the Agreement as a considerable improvement in the Company's debt
profile. In September of 1994, the Company was advised that the above
loans were purchased from Apple Bank by D.A.N. Joint Venture, a Limited
Partnership, an affiliate of Cadle Company. All terms and conditions
remain unchanged.
The Company had also negotiated with three of its largest creditors
for reduced settlements on their accounts in exchange for the timely
completion of a monthly payment schedule. By December 31, 1994 all three
payment schedules had been completed, resulting in Forgiveness of
Indebtedness of a total of $112,900.
The above events have provided the Company with some measure of relief
in its debt servicing requirements. As of September 30, 1995, the
Company's ratio of Current Assets to Current Liabilities is 6.64, improved
from 2.29 at September 30, 1994 and 4.52 at December 31, 1994. To the
extent that this ratio is indicative of near-term financial strength, the
above improvement may be considered a very positive sign for the Company.
Management has continued its search for additional Working Capital
with which to provide growth momentum for the Company. There are several
on-going contacts with potential lenders or acquirors, although no
assurance can be given of any success. Temporarily, at least, the
Company is able to support its operations, while striving to convert
them to positive cash flow. Working Capital at September 30, 1995 was
$561,600 as compared to $299,300 at September 30, 1994 and $505,800 at
December 31, 1994.
B. RESULTS OF OPERATIONS
Sales in the Third Quarter of 1995 were $341,300 as compared to
$341,800 in the same period last year, and up 7.2% from the $318,800
achieved in the Second Quarter of 1995. For the First Nine Months of 1995,
the Company had sales of $946,200 as compared to $942,900 in the First Nine
Months of 1994.
The Gross Profit Margins in the Third Quarter of 1995 and in the First
Nine Months of 1995 were both 25%, as compared to 25% in the Third Quarter
last year and 22.5% for the First Nine Months last year.
Selling, General and Administrative Expenses in the Third Quarter of
1995 were $72,100 as compared to $88,200 in the same period last year. A
variety of cost reduction measures in advertising and professional fees
resulted in the decrease, as was also seen in the Nine Month comparison of
$709,600 for 1995 as opposed to $731,200 for 1994.
The Company had a Net Income from Operations of $13,300 in the Third
Quarter of 1995 as compared to a Loss of $6,500 in the same period last
year, and a Profit of $33,700 in the Second Quarter of 1995. For the First
Nine Months of 1995 the Company had a Net Income from Operations of
$10,900 as compared to a Loss of $38,300 in the First Nine Months of 1994.
Interest Expenses for the Third Quarter of 1995 were $23,700 as
compared to $22,400 in the same period last year and $22,900 in the Second
Quarter of 1995. For the First Nine Months of 1995 Interest Expenses were
$69,500 as compared to $54,700 for the First Nine Months of 1994.
The Company showed a Net Loss of $9,500 in the Third Quarter of 1995
as compared to a Net Profit of $5,000 in the same period last year, which
had included an Extraordinary Item of $33,700 for Debt Forgiveness. For
the First Nine Months of 1995 the Company showed a Net Loss of $55,600 as
compared to a Net Loss of $58,100 for the First Nine Months of 1994.
It is evident from the above figures that the Company's earlier
pattern of shrinking sales has bottomed-out and that prudent financial
management has now stabilized the Balance Sheet. A solid base is building
for the anticipated growth that Management foresees.
The Company has been making modest, periodic investments in
advertising of its MOSFET-driver product line, in an effort to increase
sales volume. While this effort does bring in new customers, it is a slow
process that depends on catching customer projects at the design-in stage.
Frequently there can be an 18 to 24 month lag between initial contact and
eventual production usage. Several such programs seem to be shifting into
higher usage rates currently, although many customers do not have
continuous need of our product. As a result, monthly and quarterly sales
volume will still fluctuate with the seasonal and business cycle variations
of our growing customer base.
Management is more convinced than ever that there is a large, untapped
market for the Company's patented photo-voltaic MOSFET-drivers. These
along with our more traditional products can form the basis for a
profitable and growing business. Management is determined to pursue the
goal of increasing market awareness of our numerous products, and hopes to
succeed here as it has in the debt resolution area. Risks of failure
continue, of course, but the Company has taken a few steps back from the
brink and is moving slowly in a constructive direction.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY-HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. There are no exhibits applicable to this Form 10-
QSB.
(b) Reports on Form 8-K. Listed below are Current Reports on
Form 8-K filed by the Registrant during the fiscal quarter
ended September 30, 1995:
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIONICS, INC.
(Registrant)
Dated: NOVEMBER 7, 1995 By: /S/BERNARD KRAVITZ
Bernard Kravitz,
President
Dated: NOVEMBER 7, 1995 By: /S/BERNARD KRAVITZ
Bernard Kravitz,
Principal Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DIONICS, INC.'S QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 86,600
<SECURITIES> 0
<RECEIVABLES> 188,500
<ALLOWANCES> 0
<INVENTORY> 374,700
<CURRENT-ASSETS> 666,700
<PP&E> 1,683,900
<DEPRECIATION> 1,577,200
<TOTAL-ASSETS> 800,800
<CURRENT-LIABILITIES> 105,100
<BONDS> 1,446,200
<COMMON> 36,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 800,800
<SALES> 946,200
<TOTAL-REVENUES> 946,200
<CGS> 709,600
<TOTAL-COSTS> 935,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,500
<INCOME-PRETAX> (55,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> (55,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,600)
<EPS-PRIMARY> (.016)
<EPS-DILUTED> (.016)
</TABLE>
