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 MARCH 31, 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: 3,483,678
outstanding as of May 1, 1996
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended March 31, 1996
Item Page Herein
Item 1 - Financial Statements:
Introductory Comments 3
Condensed Balance Sheet 4
Condensed Statement of Operations 6
Statement of Cash Flows 7
Notes to Financial Statements 8
Item 2 - Management's Discussion and
Analysis or Plan of Operation 12
<PAGE>
DIONICS, INC.
MARCH 31, 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, 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 three months ended March 31, 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 SHEET
March 31, December 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
A S S E T S
CURRENT ASSETS:
Cash $153,600 $147,000
Accounts Receivable Trade
(Less Estimated Doubtful
Accounts of $5,000 in 1996
and $5,000 in 1995) Note 3 205,000 187,400
Inventory - Notes 1 and 3 370,700 354,100
Prepaid Expenses and Other-
Current Assets 25,700 30,900
Total Current Assets 755,000 719,400
PROPERTY, PLANT AND
EQUIPMENT - Note 3
(At Cost Less Accumulated
Depreciation of
$1,601,501 in 1996 and
$1,594,200 in 1995) 84,800 89,700
DEPOSITS AND OTHER ASSETS -
Note 2 27,100 26,800
Total $866,900 $835,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIONICS, INC.
CONDENSED BALANCE SHEET
March 31, 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 65,000 48,700
Accrued Expenses 66,700 48,200
Total Current Liabilities 159,600 133,800
Deferred Compensation Payable -
(Note 2) 400,300 386,100
Long-Term Debt Less Current -
Maturities - (Note 3) 851,200 843,300
Total Liabilities 1,411,100 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) (1,882,800) (1,865,900)
(323,600) (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) (544,200) (527,300)
Total $ 866,900 $ 835,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31,
1996 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SALES $ 342,000 $ 286,100
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 253,000 244,100
Selling, General and
Administrative Expenses 88,900 78,100
Total Costs and Expenses 341,900 322,200
NET INCOME (LOSS) FROM
OPERATIONS 100 (36,100)
INTEREST AND OTHER INCOME 1,200 1,000
1,300 (35,100)
OTHER DEDUCTIONS:
Interest Expense 18,200 22,900
NET (LOSS) FOR THE PERIOD $ (16,900) $ (58,000)
NET (LOSS) PER SHARE $ (.005) $ (.02)
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
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (16,900) $ (58,000)
Adjustment to Reconcile Net (Loss)
to Net Cash Used for Operating
Activities:
Depreciation and Amortization 7,300 17,100
Deferred Compensation and
Interest 14,200 19,500
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable (17,600) 78,900
(Increase) Decrease in Inventory (16,600) (25,100)
(Increase) Decrease in Prepaid
Expenses and Other Current
Assets 5,200 6,000
(Increase) Decrease in Deposits
and Other Assets (300) 500
Increase (Decrease) in Accounts
Payable 16,300 (7,000)
Increase (Decrease) in Accrued
Expenses 18,500 7,800
Net Cash Provided by Operating
Activities 10,100 39,700
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt (1,100) (1,000)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchase of Equipment (2,400) -0-
NET INCREASE IN CASH 6,600 38,700
CASH - Beginning of Year 147,000 84,900
CASH - End of Year $ 153,600 $ 123,600
</TABLE>
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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>
March 31, December 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Finished Goods $ 26,400 $ 25,200
Work-in-Process 248,000 236,900
Raw Materials 52,600 50,300
Manufacturing
Supplies 43,700 41,700
Total $370,700 $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 approxi-mated $4,100 and
is included in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 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 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
MARCH 31, 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
MARCH 31, 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 regarding the complete restructuring
of 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 $213,300. 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 certain other favorable Accounts Payable
settlements, have provided the Company with some measure of relief in its
debt servicing requirements. As of March 31, 1996 the Company's ratio of
Current Assets to Current Liabilities is 4.73, improved from 4.38 at March
31, 1995 and 1.67 at March 31, 1994. To the extent that this ratio is
indicative of near-term financial strength, the above improvements 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 March 31, 1996 was $595,400 as
compared to $484,900 at March 31, 1995 and $188,900 at March 31, 1994.
<PAGE>
B. RESULTS OF OPERATIONS
Sales in the First Quarter of 1996 rose approximately 20% to
$342,600 as compared to $286,100 in the First Quarter of 1995 and
$243,000 in the First Quarter of 1994. The Gross Profit Margin
in the First Quarter of 1996 rose to 26% as compared to 14.7% in
the First Quarter of 1995 and 5.1% in the First Quarter of 1994.
These results reflect a favorable combination of increasing
customer sales against a background of many largely fixed costs.
Selling, General and Administrative Expenses, while almost
constant in dollar terms, fell to 26% of Sales volume, as
compared to 27.3% in the First Quarter of 1995 and 31.2% in the
First Quarter of 1994. Here, too, the ratio shows improvement
because of rising Sales volume and largely fixed SG & A expenses.
As a result of the above, the Company showed a small $100
Net Income from Operations in the First Quarter of 1996, as
compared to a Loss from Operations of $36,100 in the First
Quarter of 1995 and a Loss from Operations of $63,500 in the
First Quarter of 1994. While the Net Income from Operations in
the current period is admittedly small, it grows in significance
when compared to the Losses registered in the same period of
previous years.
Interest Expenses were $18,200 in the First Quarter of 1996
as compared to $22,900 in the First Quarter of 1995 and $10,700
in the First Quarter of 1994. The year-to-year reduction in the
current period stems from specific terms outlined in the Debt
Restructuring Agreement, while Interest Expenses in the First
Quarter of 1994 involved a shortened interest period at the
commencement of that same Agreement.
For the First Quarter of 1996 the Company registered a Net
Loss of $16,900 reduced from a Net Loss of $58,000 in the same
period last year and a Net Loss of $73,600 in the First Quarter
of 1994.
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 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
profitability. While cost-reduction efforts have helped to keep
the Company alive, they are not able to generate the sales growth
needed for earnings. The Company must continue to stimulate
greater use of its Photovoltaic MOSFET-driver and Solid State
Relay product lines, as well as other new and mature 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 several 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
March 31, 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: May 13, 1996 By: /s/Bernard Kravitz
Bernard Kravitz,
President
Dated: May 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 MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 153,600
<SECURITIES> 0
<RECEIVABLES> 205,000
<ALLOWANCES> 0
<INVENTORY> 370,700
<CURRENT-ASSETS> 755,000
<PP&E> 1,686,301
<DEPRECIATION> 1,601,501
<TOTAL-ASSETS> 866,900
<CURRENT-LIABILITIES> 159,600
<BONDS> 1,251,500
<COMMON> 36,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 866,900
<SALES> 342,000
<TOTAL-REVENUES> 342,000
<CGS> 253,000
<TOTAL-COSTS> 341,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,200
<INCOME-PRETAX> (16,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,900)
<EPS-PRIMARY> (.005)
<EPS-DILUTED> (.005)
</TABLE>
