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 JUNE 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 August 1, 1996
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended June 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.
JUNE 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 result of operations for the periods being reported.
Additionally, if 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 three months ended June 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>
<TABLE>
<CAPTION>
DIONICS, INC.
CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
A S S E T S
CURRENT ASSETS:
Cash $180,600 $147,000
Accounts Receivable - Trade
(Less Estimated Doubtful
Accounts of $5,000 in 1996
and $5,000 in 1995) Note 3 195,700 187,400
Inventory - Notes 1 and 3 385,400 354,100
Prepaid Expenses and Other-
Current Assets 18,700 30,900
Total Current Assets 780,400 719,400
PROPERTY, PLANT AND
EQUIPMENT - Note 3
(At Cost Less Accumulated
Depreciation of
$1,608,900 in 1996 and
$1,594,200 in 1995) 77,400 89,700
DEPOSITS AND OTHER ASSETS -
Note 2 25,800 26,800
Total $883,600 $835,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIONICS, INC.
CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
(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) $ 27,900 $ 36,900
Accounts Payable 64,600 48,700
Accrued Expenses 61,700 48,200
Total Current Liabilities 154,200 133,800
Deferred Compensation Payable -
(Note 2) 414,500 386,100
Long-Term Debt Less Current -
Maturities - (Note 3) 844,200 843,300
Total Liabilities 1,412,900 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) (1,867,900) (1,865,900)
(308,700) (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) (529,300) (527,300)
Total $ 883,600 $ 835,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended June 30,
1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SALES $ 342,800 $ 318,800
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 233,200 209,600
Selling, General and
Administrative Expenses 77,800 75,500
Total Costs and Expenses 311,000 285,100
NET INCOME FROM OPERATIONS 31,800 33,700
INTEREST AND OTHER INCOME 1,200 1,100
33,000 34,800
OTHER DEDUCTIONS:
Interest Expense 18,100 22,900
NET INCOME FOR THE PERIOD $ 14,900 $ 11,900
NET INCOME PER SHARE $ .004 $ .003
Average Number of Shares
Outstanding Used in
Computation of Per Share
(Loss) 3,483,678 3,483,678
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
Six Months Ended June 30,
1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SALES $ 684,800 $ 604,900
COSTS AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 486,200 453,700
Selling, General and
Administrative Expenses 166,700 153,600
Total Costs and Expenses 652,900 607,300
NET INCOME (LOSS) FROM OPERATIONS 31,900 (2,400)
INTEREST AND OTHER INCOME 2,400 2,100
34,300 (300)
OTHER DEDUCTIONS:
Interest Expense 36,300 45,800
NET (LOSS) FOR THE PERIOD $ (2,000) $ (46,100)
NET (LOSS) PER SHARE $ (.0006) $ (.013)
Average Number of Shares
Outstanding Used in
Computation of Per Share
(Loss) 3,483,678 3,483,678
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIONICS, INC.
STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (2,000) $ (46,100)
Adjustment to Reconcile Net (Loss)
to Net Cash Used for Operating
Activities:
Depreciation and Amortization 14,700 34,100
Deferred Compensation and
Related Interest 28,400 39,100
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable (8,300) 23,600
(Increase) Decrease in Inventory (31,300) (66,300)
(Increase) Decrease in Prepaid
Expenses and Other Current
Assets 12,200 12,000
(Increase) Decrease in Deposits
and Other Assets 1,000 1,000
Increase (Decrease) in Accounts
Payable 15,900 (21,800)
Increase (Decrease) in Accrued
Expenses 13,500 (2,100)
Net Cash Provided by (Used)
Operating Activities 44,100 (26,500)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt (8,100) (2,100)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchase of Equipment (2,400) -0-
NET INCREASE (DECREASE) IN CASH 33,600 (28,600)
CASH - Beginning of Period 147,000 84,900
CASH - End of Period $ 180,600 $ 56,300
</TABLE>
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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>
June 30, December 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Finished Goods $ 27,400 $ 25,200
Work-in-Process 257,800 236,900
Raw Materials 54,700 50,300
Manufacturing
Supplies 45,500 41,700
Total $385,400 $354,100
</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, 1995 the cash surrender value on the existing policy
approximated $4,100 and is included in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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, 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
JUNE 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 4.0 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
JUNE 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 form 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 complete 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 the same Agreement,
qualifying it for additional Forgiveness of both $167,500 of Debt plus
$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 Accounts
Payable, have provided the Company with some measure of relief in its debt
servicing requirements. As of June 30, 1996 the Company's ratio of Current
Assets to Current Liabilities is 5.06, down slightly from 5.54 at June 30,
1995 and considerably improved from 1.83 at June 30, 1994. To the extent
that this ratio is indicative of near-term financial strength, the more
current 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 lenders or acquirors, although no
assurance can be given of any successful outcomes. Temporarily, at least,
the Company is able to support its operations while striving to convert
them to a positive cash flow basis. Working Capital at June 30, 1996 was
$626,200 as compared to $533,900 at June 30, 1995 and $245,500 at June 30,
1994.
<PAGE>
B. RESULTS OF OPERATIONS
Sales in the Second Quarter of 1996 were $342,800, up 7.5 percent from
the $318,800 achieved in the same period last year and essentially
unchanged from the $342,600 level achieved in the First Quarter of this
year.
The Gross Profit Margin in the Second Quarter of 1996 was 32 percent,
as compared to 34 percent in the same period last year and 26 percent in
the First Quarter of 1996. The slight drop in the current period is
attributed to one-time start-up costs related to certain new product
developments.
Selling, General and Administrative Expenses in the Second Quarter of
1996 were $77,800, or 22.7 percent of Sales, as compared to $75,500, or
23.7 percent of Sales in the same period last year. Selling, General and
Administrative Expenses in the current period were also down from $88,900,
or 26 percent of Sales, in the First Quarter of 1996.
The Company showed a Net Profit from Operations of $31,800 in the
Second Quarter of 1996, as compared to $33,700 in the same period last
year, but up substantially from the $100 level of the First Quarter of
1996. The improvement in the consecutive quarter comparison stems from a
more favorable mix of product sales in the later period.
Interest Expenses in the Second Quarter of 1996 were $18,100 as
compared to $22,900 in the same period last year, and $18,200 in the First
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 $14,900 for the Second Quarter of
1996 as compared to $11,900 in the same period last year, and improved from
a Net Loss of $16,900 in the First Quarter of 1996. The improvement in the
consecutive quarter performance stems from a more favorable mix of products
being sold in the later period.
For the First Half of 1996, the Company saw its Sales level increase
13 percent from the First Half of 1995, rising to $684,800 in 1996 from
$604,900 in 1995. The Gross Profit Margin also improved, rising to 29
percent in the First Half of 1996 from 25 percent in the First Half of
1995. The Company showed a Net Income from Operations of $31,900 in the
First Half of 1996 as compared to a Net Loss from Operations of $2,400 in
the First Half of 1995. Interest Expenses decreased to $36,300 in the
First Half of 1996 as compared to $45,800 in the First Half of 1995. As a
result of the above, the Company showed a Net Loss of only $2,000 in the
First Half of 1996 as compared to a Net Loss of $46,100 in the First Half
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 Agreement.
Concerning its second major problem area, the need for currently
profitable operations, the Company has done a remarkable job of both
surviving with little or no working capital yet also making slow but steady
progress toward reaching that profitability. While cost reduction efforts
have helped to keep the Company alive, they were not able to provide the
Sales growth needed for earnings. 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 have all combined
recently to help boost Sales volume by 13 percent in the First Six-months
of 1996, with the result that the Company is on the verge of "break-even."
Management is determined to continue pursuing further increases in sales 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 several meaningful 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 June 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: August 13, 1996 By: /s/Bernard Kravitz
Bernard Kravitz,
President
Dated: August 13, 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 JUNE 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 180,600
<SECURITIES> 0
<RECEIVABLES> 195,700
<ALLOWANCES> 0
<INVENTORY> 385,400
<CURRENT-ASSETS> 780,400
<PP&E> 1,686,300
<DEPRECIATION> 1,608,900
<TOTAL-ASSETS> 883,600
<CURRENT-LIABILITIES> 154,200
<BONDS> 1,258,700
<COMMON> 36,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 883,600
<SALES> 684,800
<TOTAL-REVENUES> 684,800
<CGS> 486,200
<TOTAL-COSTS> 652,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,300
<INCOME-PRETAX> (2,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,000)
<EPS-PRIMARY> (.001)
<EPS-DILUTED> (.001)
</TABLE>
