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, 1996
[ ] 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: 3,683,678
outstanding as of November 1, 1996
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended September 30, 1996
Item Page Herein
Item 1 - Financial Statements:
Introductory Comments 3
Condensed Balance Sheet 4
Condensed Statement of Operations 6
Statement of Cash Flows 8
Notes to Financial Statements 9
Item 2 - Management's Discussion and
Analysis or Plan of Operation 13
<PAGE>
DIONICS, INC.
SEPTEMBER 30, 1996
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 months ended September
30, 1996 are not necessarily indicative of the results of operations for
the full fiscal year ended December 31, 1996.
These condensed statements should be read in conjunction with the
Company's financial statements for the year ended December 31, 1995.
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
September 30, December 31,
1996 1995
(Unaudited) (Unaudited)
A S S E T S
CURRENT ASSETS:
Cash $208,000 $147,000
Accounts Receivable Trade
(Less Estimated Doubtful
Accounts of $5,000 in 1996
and $5,000 in 1995) Note 3 214,600 187,400
Inventory - Notes 1 and 3 380,400 354,100
Prepaid Expenses and Other-
Current Assets 20,400 30,900
Total Current Assets 823,400 719,400
PROPERTY, PLANT AND
EQUIPMENT - Note 3
At Cost Less Accumulated
Depreciation of
$1,616,300 in 1996 and
$1,594,200 in 1995 70,100 89,700
DEPOSITS AND OTHER ASSETS -
Note 2 25,200 26,800
Total $918,700 $835,900
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
September 30, December 31,
1996 1995
(Unaudited) (Unaudited)
L I A B I L I T I E S
CURRENT LIABILITIES:
Current Portion of Long-Term
Debt - (Note 3) $ 27,900 $ 36,900
Accounts Payable 77,100 48,700
Accrued Expenses 48,400 48,200
Total Current Liabilities 153,400 133,800
Deferred Compensation Payable -
(Note 2) 428,700 386,100
Long-Term Debt Less Current -
Maturities - (Note 3) 837,200 843,300
Total Liabilities 1,419,300 1,363,200
CONTINGENCIES AND COMMENTS
SHAREHOLDERS' EQUITY
Common Shares - $.01 Par Value
Authorized 5,000,000 Shares
Issued 3,648,222 Shares in
1996 and 3,648,222 in 1995 36,400 36,400
Additional Paid-in Capital 1,522,800 1,522,800
(Deficit) (1,839,200) (1,865,900)
(280,000) (306,700)
Less: Treasury Stock at Cost
164,544 Shares in 1996 and
164,544 Shares in 1995 (220,600) (220,600)
Total Shareholder's Equity
(Deficit) (500,600) (527,300)
Total $ 918,700 $ 835,900
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
SALES $ 419,800 $ 341,300
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 298,000 255,900
Selling, General and
Administrative Expenses 76,200 72,100
Total Costs and Expenses 374,200 328,000
NET INCOME FROM OPERATIONS 45,600 13,300
INTEREST AND OTHER INCOME 1,200 900
46,800 14,200
OTHER DEDUCTIONS:
Interest Expenses 18,100 23,700
NET INCOME (LOSS) FOR THE PERIOD $ 28,700 $ (9,500)
NET INCOME (LOSS) PER SHARE $ .008 $ (.003)
Average Number of Shares
Outstanding Used in
Computation of Per Share
(Loss) 3,483,678 3,483,678
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
(UNAUDITED) (UNAUDITED)
SALES $1,104,600 $ 946,200
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 784,200 709,600
Selling, General and
Administrative Expenses 242,900 225,700
Total Costs and Expenses 1,027,100 935,300
NET INCOME FROM OPERATIONS 77,500 10,900
INTEREST AND OTHER INCOME 3,600 3,000
81,100 13,900
OTHER DEDUCTIONS:
Interest Expenses 54,400 69,500
NET INCOME (LOSS) FOR THE
PERIOD $ 26,700 $ (55,600)
NET INCOME (LOSS) PER SHARE $ .008 $ (.016)
Average Number of Shares
Outstanding Used in
Computation of Per Share
(Loss) 3,483,678 3,483,678
<PAGE>
DIONICS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 26,700 $ (55,600)
Adjustment to Reconcile Net Income
(Loss) to Net Cash Used for
Operating Activities:
Depreciation and Amortization 22,000 51,100
Deferred Compensation and
Related Interest 42,600 58,700
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable (27,200) 48,000
(Increase) Decrease in Inventory (26,300) (76,400)
(Increase) Decrease in Prepaid
Expenses and Other Current Assets 10,500 12,700
(Increase) Decrease in Deposits and
Other Assets 1,600 1,600
Increase (Decrease) in Accounts
Payable 28,400 (11,600)
Increase (Decrease) in Accrued
Expenses 200 (23,600)
Net Cash provided from Operating
Activities 78,500 4,900
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Repayment of Debt (15,100) (3,200)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (2,400) -0-
NET INCREASE (DECREASE) IN CASH 61,000 1,700
CASH - Beginning of Period 147,000 84,900
CASH - End of Period $208,000 $ 86,600
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - INVENTORY:
Inventory is stated at the lower of cost (which
represents cost of materials and manufacturing costs ona first-
in, first-out basis) or market, and arecomprised of the following:
September 30, December 31,
1996 1995
(Unaudited) (Unaudited)
Finished Goods $ 24,000 $ 25,200
Work-in-Process 250,800 236,900
Raw Materials 59,700 50,300
Manufacturing
Supplies 45,900 41,700
Total $380,400 $354,100
NOTE 2 - DEFERRED COMPENSATION PAYABLE:
In 1987 the company entered into an agreement with itschief
executive officer which provided for payments tohim commencing with the
year in which he reaches theage65, provided that the officer does not
voluntarilyterminate his employment prior to attaining age 65.Suchagreement
further provides that in the event ofdeath or if the company terminates
the employment ofthe officer prior to age 65 such payments are tocommence
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 fundthe death benefits
described above. At December 31,1995 the cash surrender value on the
existing policyapproximated $4,100 and is included in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3 - LOANS PAYABLE - APPLE BANK:
Effective as of January 31, 1994, the Company and AppleBank for
Savings (the "Bank") entered into a restruc-turing 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 newterm loan in
the principal amount of $283,850, ("TermLoan A") structured over two five-
year periods. Duringthe first five-year period, the Company will pay
interest only, computed at an annual rate of 6.0percent. 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 monthlyinstallments, plus interest at Prime plus two percenton 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 of7.5 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 which began in April
1996, 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, 1996
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 4.0percent, 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 calledfor in the January 3, 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
SEPTEMBER 30, 1996
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 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
Effective January 31, 1994, the Company signed a "RESTRUCTURING
AGREEMENT" between DIONICS, INC. and APPLE BANK FOR SAVINGS," which
successfully completed negotiations for a total restructuring of all its
debts with Apple Bank. During the previous three years, the Company's
inability to pay either interest or principal had kept its loans in a non-
performing default status. With the signing of this new Agreement, 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.
Also, as of December 31, 1995, the Company had fully met certain
financial performance standards called for in that same Agreement, thus
qualifying for additional Forgiveness of both $167,500 of Debt and $45,000
of Deferred Interest, for a total of $213,000. Although the actual
Forgiveness is due to be 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. See Note 3 to the
Financial Statement for a description of the Restructuring Agreement. (In
September of 1994, the Company was advised that the above loans had been
purchased from Apple Bank by D.A.N. Joint Venture, a Limited Partnership,
and an affiliate of The Cadle Company. All terms and conditions remain
unchanged.)
The above Agreement, plus favorable settlements of several other large
Accounts Payable, have provided the Company with some measure of relief in
its debt servicing requirements. As of September 30, 1996 the Company's
ratio of Current Assets to Current Liabilities is 5.37, down slightly from
6.34 at September 30, 1995 but improved from 4.52 at September 30, 1994.
To the extent that this ratio is indicative of near-term financial
strength, these recently elevated levels 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 sources, although no assurance can be
given of any successful outcomes. The Company is currently able to support
its operations while striving to convert them to a more strongly positive
cash flow basis. Working Capital at September 30, 1996 was $670,000 as
compared to $561,600 at September 30, 1995 and $505,800 at September 30,
1994.
<PAGE>
B. RESULTS OF OPERATIONS
Sales in the Third Quarter of 1996 were $419,800, up 23 percent from
the $341,300 achieved in the same period last year, and up 22.5 percent
from the $342,800 level achieved in the Second Quarter of this year.
The Gross Profit Margin in the Third Quarter of 1996 was 29 percent,
as compared to 25 percent in the same period last year and 31 percent in
the Second Quarter of 1996. The recent increases are primarily attributed
to efficiency advantages of scale related to sales volume improvements.
Selling, General and Administrative Expenses in the Third Quarter of
1996 were $76,200, or 18 percent of Sales, as compared to $72,100, or 21
percent of Sales in the same period last year. Selling, General and
Administrative Expenses in the current period were also down slightly from
$77,800, or 22.7 percent of Sales, in the Second Quarter of 1996.
The Company showed a Profit from Operations of $45,600 in the Third
Quarter of 1996, as compared to a Profit from Operations of $13,300 in the
same period last year, and up further from the $31,800 level of the Second
Quarter of 1996. The improvement in the consecutive-quarter comparison
stems from both increased sales volume and a more favorable mix of products
sold in the later period.
Interest Expenses in the Third Quarter of 1996 were $18,100 as
compared to $23,700 in the same period last year, and $18,100 in the Second
Quarter of 1996. The decrease in Interest Expenses in the 1996 periods
derive from more favorable treatment of the Company's debt as outlined in
the Restructuring Agreement between Dionics, Inc. and Apple Bank for
Savings, dated January 31, 1994.
The Company showed a Net Profit of $28,700 for the Third Quarter of
1996 as compared to a Net Loss of $9,500 in the same period last year, and
further improved from a Net Profit of $14,900 in the Second Quarter of
1996. The improvement in the consecutive-quarter performance stems from a
more favorable mix of products being sold in the later period, and the
efficiency benefits from increased volume.
For the Nine-Months of 1996, the Company saw its Sales level increase
16.7 percent from the Nine-Months of 1995, rising to $1,104,600 in 1996
from $946,200 in 1995. The Gross Profit Margin also improved, rising to 29
percent in the Nine-Months of 1996 from 25 percent in the Nine-Months of
1995. The Company showed a Profit from Operations of $77,500 in the Nine-
Months of 1996 as compared to a Profit from Operations of $10,900 in the
Nine-Months of 1995. Interest Expenses decreased to $54,400 in the Nine-
Months of 1996 as compared to $69,500 in the Nine-Months of 1995.
As a result of the above, the Company showed a Net Profit of $26,700
in the Nine-Months of 1996 as compared to a Net Loss of $55,600 in the
Nine-Months of 1995.
<PAGE>
In recent years, the Company has been striving to correct its two
basic problems: one, past debts, primarily to the Bank; and two, currently
unprofitable operations. With the 1993 sale of one of its two buildings
and the successful negotiation of 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. The Company has even been able to further reduce that debt,
along with certain interest charges, by meeting particular financial
performance standards for 1994 and 1995, as called out in that Debt
Restructuring Agreement.
Concerning its second major problem area, the need for currently
profitable operations, the Company has both survived during a period of
little or no working capital yet also made slow but steady progress toward
reaching its goal of profitability. While its cost-reduction efforts have
clearly helped to keep the Company alive, they were not able to provide the
Sales growth needed for earnings. To increase Sales, the Company must
continue to stimulate greater market use of its Photovoltaic MOSFET-drivers
and Solid State Relays, as well as other new and mature products. These
products have all combined recently to help boost Sales volume by 16.7
percent in the Nine-Months of 1996, with the result that the Company is now
showing a Net Profit. It may now be reasonably assumed that 1996 will be
the first profitable full-year the Company will experience in the last
decade. Management is determined to continue pursuing further sales
increases 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 it should also be noted that the Company has recently taken a
number of significant steps back from the brink, and is continuing to move
steadily, if slowly, in the right 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, 1996:
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 11, 1996 By: /s/Bernard Kravitz
Bernard Kravitz,
President
Dated: November 11, 1996 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, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 208,000
<SECURITIES> 0
<RECEIVABLES> 214,600
<ALLOWANCES> 0
<INVENTORY> 380,400
<CURRENT-ASSETS> 823,400
<PP&E> 1,686,400
<DEPRECIATION> 1,616,300
<TOTAL-ASSETS> 918,700
<CURRENT-LIABILITIES> 153,400
<BONDS> 1,419,300
<COMMON> 36,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 918,700
<SALES> 1,104,600
<TOTAL-REVENUES> 1,104,600
<CGS> 784,200
<TOTAL-COSTS> 1,027,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,400
<INCOME-PRETAX> 26,700
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,700
<EPS-PRIMARY> .008
<EPS-DILUTED> .008
</TABLE>
