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, 1997
[ ] 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 May 1, 1997
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended March 31, 1997
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 11
<PAGE>
DIONICS, INC.
MARCH 31, 1997
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 three months ended March 31, 1997
are not necessarily indicative of the results of operations for the full
fiscal year ended December 31, 1997.
These condensed statements should be read in conjunction with the
Company's financial statements for the year ended December 31, 1996.
<PAGE>
DIONICS, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited) (Unaudited)
A S S E T S
CURRENT ASSETS:
Cash $ 324,200 $ 210,900
Accounts Receivable Trade
(Less Estimated Doubtful
Accounts of $10,000 in 1997
and $10,000 in 1996) Note 3 177,500 230,400
Inventory - Notes 1 and 3 397,400 402,400
Prepaid Expenses and Other-
Current Assets 25,700 30,800
Total Current Assets 924,800 874,500
PROPERTY, PLANT AND EQUIPMENT -
Note 3
At Cost - Less Accumulated
Depreciation of $1,626,700
in 1997 and $1,623,600 in 1996 59,600 62,700
DEPOSITS AND OTHER ASSETS -
Note 2 22,500 23,100
Total $1,006,900 $ 960,300
<PAGE>
DIONICS, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited) (Unaudited)
L I A B I L I T I E S
CURRENT LIABILITIES:
Current Portion of Long-Term
Debt - (Note 3) $ 28,500 $ 28,200
Accounts Payable 65,300 66,200
Accrued Expenses 70,200 62,400
Total Current Liabilities 164,000 156,800
Deferred Compensation Payable -
(Note 2) 457,900 442,900
Long-Term Debt Less Current -
Maturities - (Note 3) 822,500 829,900
Total Liabilities 1,444,400 1,429,600
CONTINGENCIES AND COMMENTS
SHAREHOLDERS' EQUITY
Common Shares - $.01 Par Value
Authorized 5,000,000 Shares
Issued 3,848,222 Shares in 1997
and 3,848,222 Shares in 1996 38,400 38,400
Additional Paid-in Capital 1,522,800 1,522,800
(Deficit) (1,778,100) (1,809,900)
(216,900) (248,700)
Less: Treasury Stock at Cost
164,544 Shares in 1997 and
164,544 Shares in 1996 (220,600) (220,600)
Total Shareholder's Equity
(Deficit) (437,500) (469,300)
Total $1,006,900 $ 960,300
<PAGE>
DIONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
1997 1996
(UNAUDITED) (UNAUDITED)
SALES $ 426,400 $ 342,000
COST AND EXPENSES:
Cost of Sales (Including
Research and Development
Costs) 298,000 253,000
Selling, General and
Administrative Expenses 80,000 88,900
Total Costs and Expenses 378,000 341,900
NET INCOME FROM OPERATIONS 48,400 100
INTEREST AND OTHER INCOME 1,700 1,200
50,100 1,300
OTHER DEDUCTIONS:
Interest Expenses 18,300 18,200
NET INCOME (LOSS) FOR THE PERIOD $ 31,800 $ (16,900)
NET INCOME (LOSS) PER SHARE $ .008 $ (.005)
Average Number of Shares
Outstanding Used in
Computation of Per Share
Net Income (Loss) 3,683,678 3,483,678
<PAGE>
DIONICS, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income (Loss) $ 31,800 $(16,900)
Adjustment to Reconcile
Net Income (Loss)
to Net Cash Used for
Operating Activities:
Depreciation and Amortization 3,100 7,300
Deferred Compensation and
Related Interest 15,000 14,200
Changes in Operating Assets
and Liabilities:
(Increase) Decrease in
Accounts Receivable 52,900 (17,600)
(Increase) Decrease in
Inventory 5,000 (16,600)
(Increase) Decrease in
Prepaid Expenses
and Other Current Assets 5,100 5,200
(Increase) Decrease in
Deposits and Other Assets 600 (300)
Increase (Decrease) in
Accounts Payable (900) 16,300
Increase (Decrease) in
Accrued Expenses 7,800 18,500
Net Cash provided from
Operating Activities 120,400 10,100
CASH FLOWS USED FOR FINANCING
ACTIVITIES:
Repayment of Debt (7,100) (1,100)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Equipment -0- (2,400)
NET INCREASE IN CASH 113,300 6,600
CASH - Beginning of Period 210,900 147,000
CASH - End of Period $324,200 $153,600
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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:
March 31, March 31,
1997 1996
(Unaudited) (Unaudited)
Finished Goods $ 24,300 $ 26,400
Work-in-Process 265,900 248,000
Raw Materials 60,400 52,600
Manufacturing Supplies 46,800 43,700
Total $397,400 $370,700
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 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, 1996 the cash surrender value on the existing policy
approximated $2,500 and is included in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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
MARCH 31, 1997
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.
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
The Company has been on a steadily rising curve of financial
performance for the last several years. Although still recording losses,
each year's performance resulted in a smaller loss than in the previous
year. In the most recent year-ended December 31, 1996, the Company finally
achieved a Profit Before Extraordinary Items, the first in many years. Now
for the First Quarter of 1997 the Company has continued that improving
trend with another solid Profit.
Along with these improved operating results, the Company has also been
making steady progress in improving its underlying financial condition,
particularly as it relates to Liquidity and Capital Resources. With the
restructuring of its Bank debt, effective January 31, 1994, and the
inclusion of several other debt-reduction opportunities, the Company has
significantly eased its over-all debt profile. The strengthening of the
Company's Liquidity and Capital Resources is at least partially evident in
its improved ratio of Current Assets to Current Liabilities. Starting with
1.67 at March 31, 1994, the ratio rose to 4.38 at March 31, 1995, then to
4.73 at March 31, 1996 and currently to 5.64 at March 31, 1997. 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 to
provide further growth momentum for the Company. Contacts with potential
lenders or acquirors are always in some stage of motion, but no assurance
can be given of any successful outcomes. For the immediate future, the
Company is well able to support its ongoing operations, particularly since
they have now moved to a moderately positive cash flow basis. Also very
encouraging to Management is the progress in Working Capital, which
continued to rise to $760,800 at March 31, 1997, up from $717,700 at
December 31, 1996 and $595,400 at March 31, 1996.
B. RESULTS OF OPERATIONS
Sales in the First Quarter of 1997 rose 24.7% from the same period
last year, reaching $426,400 in the current period as compared to $342,000
in the First Quarter of 1996 and $286,100 in the First Quarter of 1995.
The current rise in volume occurred across numerous product lines, rather
than any single one, reflecting a general increase in customer interest.
The Gross Profit margin in the First Quarter of 1997 also rose, reaching
30.1%, as compared to 26% in the First Quarter of 1996 and 14.7% in the
First Quarter of 1995. These improvements stem mostly from the greater
efficiency that increasing sales volume provided against a background of
many largely fixed costs.
<PAGE>
Selling, General & Administrative costs fell both in absolute terms as
well as in percentage-of-sales terms. The decrease in the current period
came about mostly through a reduction in depreciation charges which,
together with increasing sales volume, lowered SG&A to 18.8% of sales as
compared to 26% in the same period of 1996 and 27.3% in 1995.
As a result of the above improvements, the Company showed a First
Quarter 1997 NET PROFIT FROM OPERATIONS of $48,400 as compared to $100 in
the same period last year, and a LOSS of $36,100 in the First Quarter of
1995. Interest Expenses have not changed materially in the last several
consecutive quarterly reporting periods: $18,300 in the current period,
$18,200 in the First Quarter of 1996, and $22,900 in the First Quarter of
1995.
For the First Quarter of 1997, the Company recorded a NET PROFIT of
$31,800 as compared to NET LOSSES of $16,900 in the same period of 1996 and
$58,000 in the First Quarter of 1995.
In recent years, the Company has been striving to correct its two
basic problems: past debts, primarily to the Bank; and the need for
currently profitable operations. With the 1993 sale of one of its two
buildings and the subsequent Debt Restructuring Agreement, the first
problem area was put onto a manageable basis. The Company is now able, for
the immediate future, to manage its debt obligations under the new
Agreement. It has even been able to further reduce the debt under that
Agreement, first by meeting certain financial performance standards for
both 1994 and 1995, and then through scheduled monthly debt-reduction
payments that began in early 1996.
Concerning its second basic problem, the need for currently profitable
operations, the Company succeeded in 1996 in registering its first annual
Net Profit in many years. Now, with the First Quarter 1997 results, the
Company is further strengthening its turn-around. These currently
profitable results follow the Company's remarkable job of both surviving
with little or no Working Capital and also consistently making slow but
steady improvements in financial performance. While cost reduction efforts
were able to keep the Company alive, only increasing sales volume was able
to make profits possible. The Company is continuing to try to stimulate
increasing use of its MOSFET-driver and Solid State Relay product lines, as
well as its other mature and newer products. At the time of this writing,
the evidence is strong for near-term continued improvements in both Sales
volume and Net Profits, goals that Management is determined to continue
pursuing. Management hopes to succeed in the challenge of fostering
further growth, as it has in the debt-resolution and profitability
challenges. Risks of failure persist, of course, as they do in any
commercial venture, but the Company has recently taken major steps back
from the brink with what now appears to be an accelerating rate of
progress.
<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, 1997:
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 8, 1997 By: /s/Bernard Kravitz
Bernard Kravitz,
President
Dated: May 8, 1997 By: /s/Bernard Kravitz
Bernard Kravitz,
Principal Financial
Officer
<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, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 324,200
<SECURITIES> 0
<RECEIVABLES> 177,500
<ALLOWANCES> 0
<INVENTORY> 397,400
<CURRENT-ASSETS> 924,800
<PP&E> 1,686,300
<DEPRECIATION> 1,626,700
<TOTAL-ASSETS> 1,006,900
<CURRENT-LIABILITIES> 164,000
<BONDS> 1,280,400
<COMMON> 38,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 1,006,900
<SALES> 426,400
<TOTAL-REVENUES> 426,400
<CGS> 298,000
<TOTAL-COSTS> 378,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,300
<INCOME-PRETAX> 31,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 31,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,800
<EPS-PRIMARY> .008
<EPS-DILUTED> .008
</TABLE>
