SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-8161
DIONICS, INC.
(Name of Small Business Issuer 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 (Zip Code)
executive offices)
Issuer's telephone number, including area code: (516) 997-7474
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: COMMON, PAR
VALUE $.01
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: $1,360,900.
As of March 12, 1996, the aggregate market value of the Common Stock held by
non-affiliates of the Issuer (2,233,634 shares) was approximately $122,850.
The number of shares outstanding of the Common Stock ($.01 par value) of the
Issuer as of the close of business on March 12, 1996 was 3,483,678 (excluding
164,544 treasury shares).
Documents Incorporated by Reference: None
<PAGE>
PART I
Item 1. Description of Business.
(a) Business Development.
Dionics, Inc. (the "Registrant" or the "Company") was incorporated
under the laws of the State of Delaware on December 19, 1968 as a general
business corporation. On March 8, 1974, the Registrant formed Dionics
International, Inc. as its wholly owned subsidiary under the laws of the
State of New York as a general business corporation and as a Domestic
International Sales Corporation (D.I.S.C.) under the applicable provisions
of the Internal Revenue Code. The status of such wholly owned subsidiary
as a D.I.S.C. corporation terminated pursuant to the applicable provisions
of the Tax Reform Act of 1984. During fiscal 1987, such subsidiary was
dissolved.
The Registrant has never been in bankruptcy, receivership or any
similar proceeding.
The Registrant has never been involved in any material
reclassification, merger or consolidation.
There have been no material changes in the mode of conducting the
business of the Registrant.
(b) Business of Issuer.
The Registrant designs, manufactures and sells silicon semi-conductor
electronic products, as individual discrete components, as multi-component
integrated circuits and as multi-component hybrid circuits.
(i) The individual discrete components are predominantly transistors,
diodes and capacitors, intended for use in miniature circuit assemblies
called "hybrid micro-circuits". In order to facilitate their being easily
assembled into the "hybrid" circuits products by its customers, these
products are supplied by the Registrant in un-wired unencapsulated
microscopic chip form. A variety of such components is supplied by the
Registrant, some as "standard" products which it offers to the industry at
large, and other as special or custom-tailored products which it
manufactures to certain specific electronic requirements of an individual
customer.
Due to the rapidly changing needs of the marketplace, there are
continual shifts in popularity among the various chip components offered by
the Registrant. Within the year, and from year to year, a largely random
variation in the needs of its customers prevents any meaningful comparison
among the many devices in this category. Taken as a whole, however, the
category of discrete chip components for the hybrid circuit industry is one
of the three main classes of products offered by the Registrant.
A second main class of products offered by the Registrant is
encapsulated, assembled, integrated circuits for use in electronic digital
display functions. Due to unusual and proprietary technology, the
Registrant is able to produce high-voltage integrated circuits higher than
the average available in the industry. These are designed for specific
high-voltage applications involved in digital displays based on gas-
discharge or vacuum fluorescence.
For the most part, the Registrant's sales in this category of product
are standard circuits, designed by the Registrant, and offered to the
industry at large. In some instances, customer-designed circuits are
produced and sold only to the sponsoring customer, with specific electrical
performance needed by that customer.
The third main class of products offered by the Registrant is a range
of hybrid circuits that function as opto-isolated MOSFET drivers and custom
Solid State Relays. Both of these incorporate a light emitting diode (LED)
as the input and a dielectrically-isolated (DI) array of photo-voltaic
diodes which, in response to the infra-red light input, generate a voltage
as the output. MOSFET drivers, or ISO-GATES, as the Registrant has named
them, are sold as a packaged combination of the LED and photo-voltaic
chips. Custom Solid State Relays also add the MOSFET output devices in the
same package along with certain other associated components.
The percentage of total revenues for each of the three product classes
was in excess of fifteen (15%) percent in 1995.
(ii) The Registrant has not invested any material amount of assets in,
nor has it announced, any new major product line in any new industry
segment.
(iii) Raw materials essential to the business of the Registrant
are readily available from many sources within the United States.
(iv) The Registrant has had nine (9) United States patents issued to
date. Each patent is for a 17-year duration. The earliest patent was
granted in 1971 and the latest in 1990. Therefore, the expiration dates
range from 1988 through 2007. Of those, the only material ones are those
related to the Registrant's high-voltage integrated circuits and high speed
MOSFET-drivers, the latter a relatively new product area for the
Registrant.
(v) The business of the Registrant is not seasonal.
(vi) Customers to whom, for the fiscal year ended December 31, 1995,
sales were made equal to approximately 10% or more of the Registrant's
sales:
Approximate
Percentage
Name of Business
Customer "A" 22.4%
Customer "B" 8.6%
The actual names of the customers above referred to are not set forth
since the identity of such substantial customers is a trade secret of the
Registrant and deemed confidential. Disclosure of such names would be
detrimental to the best interests of the Registrant and its investors and
would adversely affect the Registrant's competitive position.
The loss of any of the above customers would have a material adverse
affect on the business of the Registrant.
(vii) Almost all of the orders for the Registrant's products are
by their terms cancelable, or their delivery dates may be extended by a
customer without penalty. There can be no assurance that any of the orders
will become consummated sales. Accordingly, none of the orders that the
Registrant has can be designated as backlog. With respect to orders that
are believed to be firm, but are nonetheless subject to cancellation, such
backlog was at December 31, 1994 $290,000, and at December 31, 1995
$251,000. At March 15, 1996, such backlog had increased to $572,000.
(viii) No material portion of the Registrant's business is subject
to renegotiation of profits or termination of contracts or subcontracts at
the election of the Government.
(ix) The Registrant competes with numerous other companies which
design, manufacture and sell similar products. Some of these competitors
have broader industry recognition, have financial resources substantially
greater than the Registrant and have far more extensive facilities, larger
sales forces and more established customer and supplier relationships than
those which are available to the Registrant.
Competition in the industry is principally based upon product
performance and price. The Registrant's competitive position is based upon
its evaluation of its products' superior performance and its general
pricing structure which Management believes is favorable in its industry
although the Registrant may suffer from price competition from larger
competitors whose facilities and volume base enable them to produce a
competitive product at a lower price
(x) The estimated dollar amount spent during each of the last three
fiscal years on company-sponsored research and development activities,
determined in accordance with generally accepted accounting principles are:
1993 - $ 25,000
1994 - $ 30,000
1995 - $ 30,000
The amounts spent during each of such years on customer-sponsored
research activities are not material.
(xi) Compliance with Federal, State and local provisions which have
been enacted or adopted regulating the discharge of materials into the
environment or otherwise relating to the protection of the environment has
had no material effect upon the Registrant's capital expenditures, earnings
or competitive position.
(xii) The number of persons employed by Registrant is 22. The
Registrant's employees are not represented by unions and/or collective
bargaining agreements.
Item 2. Description of Property.
The Registrant's executive offices are located at 65 Rushmore Street,
Westbury, New York, which property is owned by the Registrant.
The Registrant fully utilizes 65 Rushmore Street which presently
houses all of the Registrant's manufacturing facilities, as well as all of
its research, sales and management activities.
In 1994, the Registrant sold adjoining property known as 73 Rushmore
Street, Westbury, New York, which at the time of sale housed approximately
10% of the Registrant's manufacturing facilities. Since the sale of such
property, all manufacturing facilities have been combined at 65 Rushmore
Street.
The Registrant believes that its present facilities at 65 Rushmore
Street are adequate for current operations.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the
Registrant is a party or to which any of its property is subject.
Item 4. Submission of Matters to a Vote of Security-Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market Information.
The Registrant's Common Stock is traded in the over-the-counter market
and is quoted on the OTC Bulletin Board and in the "pink sheets"
promulgated by the National Quotation Bureau, Inc. Until July 31, 1989,
the Registrant's Common Stock was quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ). In addition from
May 21, 1985 to February 3, 1989, the Common Stock of the Registrant was
quoted on the NASDAQ National Market System.
The following table sets forth the range of the high and low bid
quotations for the Company's Common Stock for each period indicated during
1994 and 1995.
Period Bid Prices
1994 High Low
First Quarter .02 .01
Second Quarter .01 .005
Third Quarter .005 .001
Fourth Quarter .01 .005
1995 High Low
First Quarter .01 .001
Second Quarter .01 .005
Third Quarter .01 .005
Fourth Quarter .01 .001
The foregoing over-the-counter market quotations reflect inter-dealer
prices, without retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
(b) Holders.
As of March 12, 1996 there were approximately 525 record holders of
the Registrant's Common Stock.
(c) Dividends.
During the last two fiscal years of the Registrant, no cash dividends
have been declared or paid on the Registrant's Common Stock.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
A. LIQUIDITY AND CAPITAL RESOURCES
Starting in 1987, unprofitable operations were causing a continuing
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 later
inability to make payments of either interest or principal had placed both
loans in a non-performing status for almost three years.
In July of 1993, the Company was able to sell one of its two
buildings, permitting it to pay the Bank $250,000 against the one-million
dollar real estate loan and thus reduce 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 complete restructuring of all remaining debt. The
process was successfully concluded with the signing of a "RESTRUCTURING
AGREEMENT between DIONICS, INC. and APPLE BANK FOR SAVINGS," effective
January 31, 1994. The previous default condition 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 Item 12 and the Notes to the Financial Statements included
elsewhere herein 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 successfully negotiated with three of its largest
creditors for reduced settlement on their accounts in exchange for the
timely completion of a monthly payment schedule. By December 31, 1994 all
three payment schedules were completed, resulting in Forgiveness of
Indebtedness of a total of $112,900.
Although the Company saw a considerable improvement in its financial
condition at December 31, 1995, it was still concluded by Management that
the expenditure, at this time, of a major portion of the Company's cash
resources for fully audited financial reports would be unwise. Financial
data was therefore prepared by the Company, with the assistance of the
Company's non-auditing accounting firm which supplied an Accountant's
Compilation Report for this filing.
During 1995, Net Losses before Extraordinary Items were once again
reduced, and the Company also managed an Operating Profit for the first
time in many years. In addition, the number of employees still working
part-time has been further reduced to less than ten percent of the total
number of employees. The severe financial strain on these employees has
been somewhat offset by the Company's registering for New York State's
"Shared Work" program of partial unemployment benefits.
The Company's Cash account increased during 1995 by $62,100 and its
Total Current Assets rose from $649,300 at the end of 1994 to $719,400 at
the end of 1995. Accounts Payable dropped during the year from $75,900 at
the end of 1994 to $48,700 at the end of 1995. Total Current Liabilities
also improved, dropping from $143,500 to $133,800. The ratio of Total
Current Assets to Total Current Liabilities thus improved from 4.52 at
12/31/94 to 5.38 at 12/31/95. To the extent that this ratio is indicative
of near-term financial strength, the above improved level may be considered
a very positive sign for the Company.
Further improvement occurred in the Company's financial picture at the
end of 1995, stemming from certain terms of the January 31, 1994 Debt
Restructuring Agreement described earlier. Having fully met, in 1994 and
1995, the particular financial performance criteria called for in that
Agreement, the Company has now completely and fully qualified for the
Forgiveness of specific portions of its debt. Although the actual
forgiveness is due to be formally granted on the "Interim Maturity Date"
(January 31, 1999) as called out in the Agreement, the Company has, in the
interests of more clearly describing its over-all debt situation, decided
to adopt those changes in its current and future reports. The Forgiveness
covers a portion of debt equal to $167,500 plus previously deferred
interest totalling $45,800, for a grand total of $213,300. As a result,
total Company debt, including Short-Term and Long-Term, has now been
reduced to $880,200. This amount includes a $415,000 mortgage loan.
As a further result of the Company's slow but steady process of
improvements during the last several years, it is possible to also point
out the gradual upgrading of the Company's Net Worth. Starting with a
negative Net Worth of $1,273,000 in 1992, it progressed to a negative
$730,300 in 1993, a negative $694,900 in 1994 and now a negative $527,300
for 1995. It is also worthy of note that if it is taken into account that
the Company's real estate property value on the open market is believed to
be approximately $400,000 higher than the heavily depreciated value shown
on its books, the true Net Worth would look more like a negative $127,000.
Management has been continuing its search for sources of additional
working capital to provide growth momentum for the Company. Several
contacts are active with potential lenders or acquirors, and it is believed
that the continuing improvement in the Company's Balance Sheet should
enhance those efforts, although no assurance of success can be given.
Temporarily, at least, the Company is well able to support its current
operations, while making further efforts to convert them fully to a profit-
making, positive cash flow basis. Management is greatly encouraged by
recent improvements in those directions.
Working Capital improved further at 12/31/95 to $585,600 from $505,800
at 12/31/94 and $217,900 at 12/31/93. The continuing positive trend in
Working Capital reflects the continuing improvements in operations over
the past several years. In summation, the Company's liquidity is much
improved.
Capital expenditures in 1994 and 1995 were not at material levels, and
for 1996 Management expects similar results.
B. RESULTS OF OPERATIONS
Operating results for 1995 showed a 3.7 percent increase in Sales
volume at $1,360,900 as compared to the 1994 level of $1,311,500, the 1993
level of $1,421,600 and the 1992 level of $1,215,800. However, since the
1993 total included a $200,000 sale of a patent license, there have
actually been three consecutive years of small but steady increases in
sales of products and services since the low-point of 1992. The trend has
greater significance than the admittedly small increases, in that it more
sharply indicates the end of a previously long series of annual decreases
and now projects at least a solid "bottoming out."
The Company had a Net Profit from Operations of $43,300 in 1995, its
first in many years. This compares to Net Losses from Operations of $8,500
in 1994 and $38,900 in 1993. Before Extraordinary Items, (BEI) 1995 had a
Net Loss of $45,700 as compared to BEI Net Losses of $77,500 in 1994 and
$195,600 in 1993.
The Gross Profit Margin for 1995 again rose slightly to 26.8 percent
as compared to 25.2 percent in 1994 and 21.8 percent in 1993. Selling,
General and Administrative Expenses as a percentage of Sales volume
continued to fall gradually, registering 23.6 percent in 1995, as compared
to 25.9 percent in 1994 and 28.5 percent in 1993, the last year's figure
being adjusted to exclude patent-license income from its Sales volume. The
above described small but steady improvements in Gross Profit Margin and S,
G & A Expenses reflect a continuing trend of cost reductions and
productivity enhancements.
Research & Development expenditures in 1995 remained unchanged as
compared to the $30,000 level of 1994 and up slightly from the $25,000
level of 1993. These levels reflect primarily the limited funds available
for R & D, as well as a continuing emphasis on the sale of already existing
products. The Company has numerous fully-developed products which it is
trying to market more extensively, although it does engage in a limited
amount of new product development. As soon as the higher-priority need for
profitability is met, the Company may devote more effort to R & D.
Interest Expense for 1995 was $92,800 as compared to $77,400 in 1994,
the year in which the Debt Restructuring Agreement was implemented and in
which only 10 months of interest was charged. It should also be noted that
the Debt Forgiveness earned by terms of that Agreement has now resulted in
reduction of Deferred Interest of $24,800 for 1995 and $21,000 for 1994.
Incorporating the Forgiveness of Debt referred to earlier, the Company
was able to show in 1995 a Net Profit For The Year of $167,600 as compared
to a Net Profit For The Year of $35,400 in 1994 and $468,400 in 1993, the
last being a figure that included a considerable profit from the sale of
one of the Company's buildings.
In recent years the Company has been striving to correct its two basic
problems: past debts, primarily to the Bank; and currently unprofitable
operations. With the 1993 sale of one of its two buildings and the
subsequent Debt Restructuring Agreement, the first problem area has been
put onto a manageable basis. The Company is no longer in default and is
able, for the foreseeable future, to manage its debt obligations under the
new debt repayment schedule. It has even been able to further reduce that
debt by meeting certain financial performance requirements for 1994 and
1995.
Concerning the need for currently profitable operations, the Company
has done a remarkable job of both surviving with little or no working
capital and also making slow but steady progress toward reaching
profitability. While cost-reduction efforts were able to keep the Company
alive, they are not capable of generating growth in sales and earnings.
The Company must continue to stimulate greater use of its photovoltaic
MOSFET-driver and Solid State Relay product lines, as well as its other
mature and newer products. Management is determined to continue pursuing
the goal of increased market awareness of our numerous products and hopes
to succeed in this challenge as it has in the debt-resolution challenge.
Risks of failure persist, of course, but the Company has at least taken a
few steps back from the brink and continues to move slowly but steadily in
the right direction.
<PAGE>
Item 7. Financial Statements.
See pages F-1 through F-9. In addition, see Part II, Item 6 for
information as to the Company's decision to file unaudited financial
statements.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act.
Identity of Directors:
Position and Offices Director
Name Age with Registrant Since
Bernard Kravitz 62 President, Secretary, 1969
Treasurer
Solomon Berkowitz 73 None(1) 1975
The term of office for each director is until the next annual meeting
of stockholders. There are no arrangements or understandings between any
of the directors and any other persons pursuant to which he was selected as
director.
(1) A partner in Ernest D. Loewenwarter & Co., Certified Public
Accountants, which firm performs non-audit accounting services for
Registrant.
Identity of Executive Officers:
Officer
Name Age Position Since
Bernard Kravitz 62 President, Secretary, 1969
Treasurer
The term of office for each officer is until the next annual meeting
of directors. There are no arrangements or understandings between the
Registrant's sole officer and any other persons pursuant to which he was
selected as an officer.
Identity of certain significant employees:
The Registrant does not believe it has any significant employees as
defined in Item 401, Regulation S-B.
However, in the event that it shall be determined that the Registrant
has such significant employees, then the response to this item would
require disclosure of otherwise non-public corporate information, the
disclosure of which would adversely affect the Registrant's competitive
position.
Family Relationships:
None.
Business Experience:
(i) Bernard Kravitz has, for more than the past five years, been an
officer and employee of the Registrant.
(ii) Solomon Berkowitz is a certified public accountant and has, for
more than the past five years, been a partner in the accounting firm of
Ernest D. Loewenwarter & Co., which firm performs non-audit accounting
services for the Registrant. During 1995, fees of $9,600 were paid to such
firm.
Involvement in Certain Legal Proceedings:
None.
Promoters and Control Persons:
N/A
Compliance with Section 16(a) of the Exchange Act:
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes of
ownership of Common Stock of the Company. Officers, directors and greater
than ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, with respect to the year ended December
31, 1995, all Section 16(a) filing requirements applicable to each person
who, at any time during the fiscal year ended December 31, 1995, was an
officer, director and greater than ten percent beneficial owner, were
complied with.
Item 10. Executive Compensation.
Summary Compensation Table:
The following summary compensation table sets forth information
concerning the annual and long-term compensation for services in all
capacities to the Company for the years ended December 31, 1995, 1994 and
1993, of those persons who were, (i) serving as the chief executive officer
of the Company or acting in a similar capacity during the year ended
December 31, 1995 and (ii) the other most highly compensated executive
officers of the Company, whose annual base salary and bonus compensation
was in excess of $100,000 (the named executive officers):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation(1) Compensation
Awards
Restricted
Stock
Name and Principal Fiscal Awards/
Position Year Salary Bonus Options
<S> <C> <C> <C> <C>
Bernard Kravitz, 1995 $89,600 $0 $0
President 1994 $82,200 $0 $0
1993 $80,200 $0 $0
</TABLE>
________________________
(1)Does not include matching contributions paid by the Registrant for Mr.
Kravitz during 1993, 1994 and 1995 of $2,406, $2,466 and $2,910, respectively,
pursuant to the Registrant's Savings and Investment Plan under section 401(k)
of the Internal Revenue Code and premiums paid by the Registrant during 1993,
1994 and 1995 on a life insurance policy it owns and maintains on the life of
Mr. Kravitz. (See subsections "Bonus and Deferred Compensation" and
"Compensation pursuant to plans" elsewhere herein under Item 10).
Bonuses and Deferred Compensation:
The Registrant has entered into an agreement with Bernard Kravitz, the
sole officer and a Director of the Registrant, to pay to his widow or estate
for a period of five (5) years following his death an amount per year equal to
the annual salary being earned by Mr. Kravitz at the time of his death,
provided that he was in the employ of the Registrant at the time of his
death. Such arrangements had previously been funded by life insurance policies
owned by the Registrant on Mr. Kravitz's life, but currently remains unfunded
due to the financial condition of the Company.
In 1987, the Board of Directors, recognizing the contributions and
experience of Mr. Kravitz sought to take certain actions which would serve both
as an inducement and an incentive for him to remain in the continuous employ of
the Company until he attains the age of 65. Accordingly, the Registrant
entered into a contingent salary continuation agreement with Bernard Kravitz.
In the event Mr. Kravitz voluntarily terminates his employment prior to
reaching age 65, he will receive no benefits whatsoever from this agreement.
Should he remain in the continuous employ of the Company until age 65, the
agreement provides that following his having attained the age of 65, Mr.
Kravitz shall receive payments over a ten year period which average $70,000 per
annum. Such agreement further provides that in the event the Registrant
terminates the employ of Mr. Kravitz prior to his attaining the age of 65, or
in the event of his death, such aforesaid payments shall be made to him, or his
widow, as the case may be, commencing upon the event first to occur. The
Registrant has a life insurance policy which it intends to use to fund the
payment of these benefits. No assurance can be made that such policy can be
used to fund the payment of these benefits, particularly in the event of
termination by the Registrant of the employ of Mr. Kravitz.
Compensation pursuant to plans:
(i) On July 1, 1985, the Registrant adopted a Savings and Investment Plan
intended to qualify as a defined contribution plan under section 401(k) of the
Internal Revenue Code. Internal Revenue approval was granted in 1986. The
plan, as amended in 1994, provides that a member (an eligible employee of the
Registrant) may elect to save no less than 1% and no more than 10% of that
portion of his compensation attributable to each pay period (subject to certain
limitations). The Registrant shall contribute (matching contributions) 100% of
a member's contribution up to 3% of the member's compensation. In addition,
the Registrant shall contribute such amount as it may determine for each plan
year (regular contributions) pro rata allocated to each member subject to
certain limitations.
Any employee with one year of service may become a member of the plan
excluding employees covered by a collective bargaining unit.
(ii) Upon eligibility for retirement, disability (as defined in the
plan), or death, a member is 100% vested in his account. Upon termination of
employment for any other reason, a member is 100% vested in that portion of
his account which he contributed and vested in the balance of his account
dependent upon years of service as follows:
<TABLE>
<CAPTION>
Years Percentage
<S> <C>
Less than 2 0%
2 25%
3 50%
4 75%
5 or more 100%
</TABLE>
(iii) Matching contributions by the Registrant for its officers during
1995 were as follows:
Bernard Kravitz - $2,910; during 1995, Mr. Kravitz was the sole executive
officer of the Registrant.
Compensation of Directors:
During the fiscal year ended December 31, 1995, the Registrant's one non-
employee director received no compensation for his services as such and the
Registrant presently intends that the same will be the case for the fiscal year
ending December 31, 1996.
Termination of Employment and Change of Control Arrangements:
None.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 12, 1996, by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's directors; and
(iii) directors and officers of the Company as a group:
<TABLE>
<CAPTION>
Percent(1)
Name and Address Shares Owned of Class
<S> <C> <C>
Bernard Kravitz 744,952(2)(3) 21.4%
110-11 Queens Blvd.
Forest Hills, NY
Sherman Gross 339,544(3) 9.7%
848 Newburgh Ave.
Woodmere, NY
Gregory Coleman 269,720 7.7%
59-09 Northern Blvd.
East Norwich, NY
Solomon Berkowitz 15,548 0.4%
15 Story St.
Brooklyn, NY
D.A.N. Joint Venture, 451,350(4) 11.5%(4)
a Limited Partnership
4363 La France Street
Newton Falls, OH
All Directors 760,500 21.8%
& Officers
as a Group
(2 persons)
____________________________
(1) Based upon issued and outstanding shares computed as follows: 3,648,222
outstanding shares less 164,544 treasury shares resulting in 3,483,678
issued and outstanding shares.
(2) Includes 732,374 shares of record and 12,578 shares owned by Mrs. Phyllis
Kravitz, Mr. Bernard Kravitz' wife.
(3) Does not include 150,000 shares owned by the Registrant's Savings and
Investment Plan under section 401(k) of the Internal Revenue Code, for
which Mr. Kravitz and Mr. Gross serve as trustees.
(4) Consists of up to 451,350 shares which D.A.N. Joint Venture, a Limited
Partnership, an affiliate of Cadle Company ("D.A.N") has the right to
acquire upon conversion of certain loans. D.A.N. does not currently own
any shares of record. (See Part III, Item 12 included elsewhere herein).
Item 12. Certain Relationships and Related Transactions.
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 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 $415,00 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.
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 the price of (i) $.75 per share until May 31, 1995, (ii) $1.00 per share
from June 1, 1995 until January 31, 1997, and (iii) $1.25 per share from
February 1, 1997 and thereafter, 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.
Having met, in 1994 and 1995, certain particular financial performance
standards as called for in the Restructuring Agreement, the Company has
qualified in full for the forgiveness of specific elements of its debt as
described in the preceding paragraph E. While according to the terms of the
Restructuring Agreement, the actual forgiveness is due to be formally granted
on "the interim maturity date" (January 31, 1999), the Company has, in the
interests of more accurately describing its over-all debt situation, decided to
adopt those changes in its current and future reports. The forgiveness will
cover all of the principal and accrued interest on Term Loan D and all of the
accrued interest on both Term Loans A and C, as more fully described in the
above-referenced Restructuring Agreement.
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.
The foregoing summary of certain provisions of the Restructuring Agreement
is qualified in its entirety by reference to the Restructuring Agreement as
filed as an exhibit to this report.
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits.
3.1 Registrant's certificate of incorporation, as amended(1)
3.2 Registrant's by-laws(1)
4.1 Specimen of common stock certificate(1)
10.1 Restructuring Agreement between Dionics, Inc. and Apple
Bank for Savings dated as of January 31, 1994(1)
(1) Previously filed and incorporated herein by reference.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the last quarter of the
period covered by this report:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DIONICS, INC.
(Registrant)
By: /s/Bernard Kravitz
Bernard Kravitz, President
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated:
Signature Title Date
/s/Bernard Kravitz President, Secretary, 3/29/96
Bernard Kravitz Treasurer, Director
(Principal Executive
Officer and Principal
Financial Officer)
/s/Solomon Berkowitz Director 3/29/96
Solomon Berkowitz
<PAGE>
ACCOUNTANTS' COMPILATION REPORT
Dionics, Inc.
65 Rushmore Street
Westbury, New York 11590
The accompanying statement of assets, liabilities and stock- holders'
equity of Dionics, Inc. as of December 31, 1995 and 1994 and the related
statement of income and expenses for the years then ended have been compile by
us.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion nor any other form of assurance on them.
ERNEST D. LOEWENWARTER & CO.
Certified Public Accountants
New York, New York
February 9, 1996
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994 (Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 147,000 $ 84,900
Accounts Receivable Trade
(Less Estimated Doubtful
Accounts of $5,000 in 1995
and $5,000 in 1994) Note 3 187,400 236,500
Inventory - Notes 1 and 3 354,100 298,300
Prepaid Expenses and Other-
Current Assets 30,900 29,600
Total Current Assets 719,400 649,300
PROPERTY, PLANT AND
EQUIPMENT - Note 3
(At Cost Less Accumulated
Depreciation of
$1,594,200 in 1995 and
$1,526,100 in 1994) 89,700 157,800
DEPOSITS AND OTHER ASSETS -
Note 2 26,800 29,000
Total $ 835,900 $ 836,100
</TABLE>
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES:
Current Portion of Long-Term
Debt - (Note 3) $ 36,900 $ 18,200
Accounts Payable 48,700 75,900
Accrued Expenses 48,200 49,400
Total Current Liabilities 133,800 143,500
Deferred Interest Payable -0- 21,000
Deferred Compensation Payable -
(Note 2) 386,100 332,600
Long-Term Debt Less Current -
Maturities - (Note 3) 843,300 1,033,900
Total Liabilities 1,363,200 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) (1,865,900) (2,033,500)
(306,700) (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) (527,300) (694,900)
Total $ 835,900 $ 836,100
</TABLE>
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SALES $1,360,900 $1,311,500
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 996,700 980,400
Selling, General and
Administrative Expenses 320,900 339,600
Total Costs and Expenses 1,317,600 1,320,000
NET INCOME (LOSS) FROM
OPERATIONS 43,300 (8,500)
INTEREST AND OTHER INCOME 3,800 1,800
47,100 (6,700)
OTHER DEDUCTIONS:
Provision for Doubtful Accounts -0- (6,600)
Interest Expense 92,800 77,400
92,800 70,800
NET (LOSS) FOR THE YEAR
BEFORE EXTRAORDINARY ITEMS (45,700) (77,500)
EXTRAORDINARY ITEMS:
Forgiveness of Indedtedness -
Account Payable -0- 112,900
Loan Payable l67,500 -0-
Deferred Interest - 1995 24,800 -0-
Deferred Interest - 1994 21,000 -0-
Total Extraordinary Items 213,300 112,900
NET INCOME FOR THE YEAR $ 167,600 $ 35,400
NET INCOME (LOSS) PER SHARE:
Before Extraordinary Items $ (.013) $ (.022)
From Extraordinary Items .061 .032
Total Per Share $ .048 $ .010
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
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 167,600 $ 35,400
Adjustment to Reconcile Net Income to
Net Cash Provided from (Used for)
Operating Activities:
Depreciation and Amortization 68,100 117,600
Deferred Compensation and Related
Interest 53,500 71,600
Forgiveness of Loan Indebtedness (167,500) -0-
Forgiveness of Interest
Indebtedness Prior Year (21,000) -0-
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable 49,100 (164,600)
(Increase) Decrease in Inventory (55,800) (60,600)
(Increase) Decrease in Prepaid
Expenses and Other Current
Assets (1,300) (6,500)
(Increase) Decrease in Deposits
and Other Assets 2,200 65,900
Increase (Decrease) in Accounts
Payable (27,200) (125,900)
Increase (Decrease) in Accrued
Expenses (l,200) 18,400
Net Cash Provided from (Used for)
Operating Activities 66,500 (48,700)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment -0- (2,600)
CASH FLOWS FROM FINANCIAL ACTIVITIES:
Repayment of Debt (4,400) (4,400)
NET INCREASE (DECREASE) IN CASH 62,100 (55,700)
CASH - Beginning of Year 84,900 140,600
CASH - End of Year $ 147,000 $ 84,900
</TABLE>
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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>
December 31, December 31,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Finished Goods $ 25,200 $ 11,900
Work-in-Process 236,900 201,200
Raw Materials 50,300 44,700
Manufacturing
Supplies 41,700 40,500
Total $354,100 $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 policies 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 approxi-
mated $4,100 and is included in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 $415,00 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
DECEMBER 31, 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. Having met, in 1994 and 1995, certain particular financial performance
standards as called for in the January 31, 1994 Debt Restructuring Agreement,
the Company has qualified in full for the Forgiveness of specific elements of
its debt. While according to the terms of the Agreement, the actual
forgiveness is due to be formally granted on "the interim Maturity Date" (Jan.
31, 1999), the Company has, in the interests of more accurately describing its
over-all debt situation, decided to adopt those changes in its current and
future reports. The forgiveness will cover all of the principal and accrued
interest on Term Loan D and all of the accrued interest on both Term Loans A
and C, as more fully described in the above-referenced Debt Restructuring
Agreement.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - LOANS PAYABLE - APPLE BANK (CONTINUED)
All the Company's Assets are pledged to the foregoing loans.
In September 1994, the Company was advised that the foregoing loans were
purchased form the Bank by D.A.N. Joint Venture, a Limited Partnership, an
affiliate of the Cadle Company.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM DIONICS, INC.'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 147,000
<SECURITIES> 0
<RECEIVABLES> 187,400
<ALLOWANCES> 0
<INVENTORY> 354,100
<CURRENT-ASSETS> 719,400
<PP&E> 1,683,900
<DEPRECIATION> 1,594,200
<TOTAL-ASSETS> 835,900
<CURRENT-LIABILITIES> 133,800
<BONDS> 1,229,400
<COMMON> 36,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 835,900
<SALES> 1,360,900
<TOTAL-REVENUES> 1,360,900
<CGS> 996,700
<TOTAL-COSTS> 1,317,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,800
<INCOME-PRETAX> 167,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 167,600
<DISCONTINUED> 0
<EXTRAORDINARY> 213,300
<CHANGES> 0
<NET-INCOME> 167,600
<EPS-PRIMARY> .048
<EPS-DILUTED> .048
</TABLE>
