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, 1996
[ ] 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: $1,521,600.
As of March 13, 1997, the aggregate market value of the Common Stock held by
non-affiliates of the Issuer (2,239,441 shares) was approximately $629,843.
The number of shares outstanding of the Common Stock ($.01 par value) of the
Issuer as of the close of business on March 13, 1997 was 3,683,678 (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 Company 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 Company has never been in bankruptcy, receivership or any similar
proceeding.
The Company 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 Company.
(b) Business of Issuer.
The Company 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 Company in un-wired unencapsulated microscopic
chip form. A variety of such components is supplied by the Company, 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 Company. 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 Company.
A second main class of products offered by the Company is
encapsulated, assembled, integrated circuits for use in electronic digital
display functions. Due to unusual and proprietary technology, the Company
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 Company's sales in this category of product are
standard circuits, designed by the Company, 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 Company 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 Company 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 1996.
(ii) The Company 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 Company are
readily available from many sources within the United States.
(iv) The Company 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 Company's high-voltage integrated circuits and high speed
MOSFET-drivers, the latter a relatively new product area for the Company.
(v) The business of the Company is not seasonal.
(vi) Customers to whom, for the fiscal year ended December 31, 1996,
sales were made equal to approximately 10% or more of the Company's sales:
Approximate
Percentage
Name of Business
Customer "A" 16.4%
Customer "B" 9.7%
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
Company and deemed confidential. Disclosure of such names would be
detrimental to the best interests of the Company and its investors and
would adversely affect the Company's competitive position.
The loss of any of the above customers would have a material adverse
affect on the business of the Company.
(vii) Almost all of the orders for the Company'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
Company 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, 1995 $251,000, and at December 31, 1996
$423,600. At March 15, 1997, such backlog had increased to $712,500.
(viii) No material portion of the Company's business is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
(ix) The Company 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 Company and have far more extensive facilities, larger
sales forces and more established customer and supplier relationships than
those which are available to the Company.
Competition in the industry is principally based upon product
performance and price. The Company'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 Company 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:
1994 - $ 30,000
1995 - $ 30,000
1996 - $ 35,000
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 Company's capital expenditures, earnings or
competitive position.
(xii) The number of persons employed by the Company is 23. The
Company's employees are not represented by unions and/or collective
bargaining agreements.
Item 2. Description of Property.
The Company's executive offices are located at 65 Rushmore Street,
Westbury, New York, which property is owned by the Company.
The Company fully utilizes 65 Rushmore Street which presently houses
all of the Company's manufacturing facilities, as well as all of its
research, sales and management activities.
In 1994, the Company sold adjoining property known as 73 Rushmore
Street, Westbury, New York, which at the time of sale housed approximately
10% of the Company's manufacturing facilities. Since the sale of such
property, all manufacturing facilities have been combined at 65 Rushmore
Street.
The Company 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 Company
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 Company'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 Company'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 Company 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
1995 and 1996 as reported by the National Quotation Bureau, Inc.
Period Bid Prices
1995 High Low
First Quarter .01 .001
Second Quarter .01 .005
Third Quarter .01 .005
Fourth Quarter .01 .001
1996 High Low
First Quarter .02 .01
Second Quarter .02 .01
Third Quarter .0625 .01
Fourth Quarter .1875 .03125
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 13, 1997 there were approximately 525 record holders of
the Company's Common Stock.
(c) Dividends.
During the last two fiscal years of the Company, no cash dividends
have been declared or paid on the Company's Common Stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
A. LIQUIDITY AND CAPITAL RESOURCES
Continuing the trend of steady improvements over the recent past, the
year-ended December 31, 1996 saw the Company cross over the break-even line
and, for the first time in many years, finally achieve a Profit Before
Extraordinary Items. While still a rather modest Profit, it does further
enhance the Company's still-limited Liquidity and Capital Resources. The
Company has been struggling back against the effects of numerous adverse
conditions that began as far back as 1987 and, working only with its very
limited, sometimes "negative" Working Capital, has both survived and now
hopefully "turned the corner." Prospects for continued improvement are
also promising, leading us to briefly review some recent, key financial
events that helped bring the Company to this point.
Effective January 31, 1994 the Company had signed a "RESTRUCTURING
AGREEMENT between DIONICS, INC. and APPLE BANK FOR SAVINGS," successfully
completing 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 cured, an amount of $376,146.59 in past-due interest
was forgiven, and numerous other favorable changes were made to the
Company's debt and payment obligations.
In addition to the above Agreement, by December 31, 1994 favorable
settlements of several other large Accounts Payable debts had provided the
Company with an additional $112,900 of Forgiveness of Indebtedness, further
easing its debt obligations.
By December 31, 1995, the Company had also fully met certain financial
performance standards called for in the new Bank Agreement, thus qualifying
for additional Forgiveness of both Debt and 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 1995-and-future
reports. See Note 3 to the Financial Statement for a more detailed
description of the Restructuring Agreement. (In September of 1994 the
above loans were 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.)
Although for 1996 the Company did generate considerable improvement in
its financial conditions, it was nevertheless concluded by Management that
the current expenditure of a significant portion of the Company's limited
cash resources for fully-audited financial reports, from a completely
independent accounting firm, would still be unwise. Instead, the Company
utilized its non-independent, non-auditing accounting firm which performed
a substantially upgraded Accountant's Review for this filing. It should be
noted that their 1996 Accountant's REVIEW meets considerably higher quality
reporting standards than did their 1995 Accountant's COMPILATION. The
quality of the 1996 financial data was further enhanced through written
confirmation of both Accounts Receivable & Accounts Payable, plus a sample-
checking verification of Inventory.
The Company's Cash account continued to increase during 1996 by
$63,900 and its Total Current Assets rose from $719,400 at the end of 1995
to $874,500 at the end of 1996. Total Current Liabilities increased only
slightly from $133,800 to $156,800, but the ratio of Current Assets to
Current Liabilities still improved from 5.38 at the end of 1995 to 5.58 at
the end of 1996. 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.
As a further result of the Company's slow but steady process of
improvements during the last several years, it is now possible to point out
both the reduction in its total Debt and the upgrading of its Net Worth.
At December 31, 1996, total Company debt, including Short-term and Long-
term, has now been reduced to $858,100, an amount that includes a mortgage
balance of $397,700. As recently as December 31, 1994 the Company's total
debt had been $1,052,100. The Company also progressed from a negative Net
Worth of $1,273,000 as far back as 1992, to a negative $730,300 in 1993, a
negative $694,900 in 1994, a negative $527,300 in 1995 and now a negative
$469,300 for 1996. Furthermore, it is interesting to note that if one
calculates Net Worth by using the Company's real estate property at the
estimated market-value instead of the greatly depreciated value on its
books, then the Company's true Net Worth would be neutral or slightly
positive.
Management has been continuing its search for sources of additional
working capital to provide additional growth momentum for the Company.
Several contacts are active with potential lenders or acquirors, and it is
believed that the continuing improvements in the Company's financial
performance and 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 efforts to
strengthen both their currently moderate profitability and positive cash
flow results. Management is very encouraged by recent improvements in
those directions.
Working Capital also continued to improve further at December 31, 1996
to $717,700 from $585,600 at December 31, 1995 and $505,800 at December 31,
1994. The continuing positive trend in Working Capital reflects the
continuing improvements in operations over the past several years and
therefore, in summation, the Company's Liquidity has been substantially
upgraded.
Capital expenditures in 1995 and in 1996 were not at material levels,
and for 1997 the Company expects similar results.
B. RESULTS OF OPERATIONS
Operating results for 1996 showed a 11.8 percent increase in Sales
volume at $1,521,600, as compared to the $1,360,900 level of 1995 and the
$1,311,500 level of 1994. This shows a continuing, possibly accelerating
trend of sales increases, and now clearly defines an upward phase in the
Company's recent turn-around.
Perhaps of even more significance, for 1996 - and for the first time
in many years - the Company showed a Net Profit Before Extraordinary Items
of $56,000, as compared to Net Losses Before Extraordinary Items of $45,700
for 1995 and $77,500 for 1994. And, since there were no Extraordinary
Items in 1996, the Company also showed a Net Profit For The Year of
$56,000. This contrasts with 1995, when Extraordinary Items of $213,300
produced a Net Profit For The Year of $167,600 and 1994, when Extraordinary
Items of $112,900 produced a Net Profit For The Year of $35,400. The
ability to show a Net Profit without benefit of any Extraordinary Items is
a sign that in 1996 the Company broke through another major barrier in its
turn-around efforts.
Benefiting from largely fixed manufacturing costs, the Gross Profit
Margin for 1996 rose again to 31.3 percent as compared to 26.8 percent in
1995 and 25.2 percent in 1994. Selling, General & Administrative Expenses
continued to gradually fall as a percent of Sales volume, reaching 22.9
percent in 1996 as compared to 23.6 percent in 1995 and 25.9 percent in
1994. The above-described small but steady improvements in both Gross
Profit Margin and S,G & A Expenses reflect a continuing trend of cost
reductions and productivity enhancements.
Research & Development expenditures rose slightly to $35,000 in 1996
as compared to $30,000 in both 1995 and 1994. 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 the higher priority need for consistent profitability is
met, the Company may devote more effort to R & D.
Interest Expense for 1996 was $70,400 as compared to $92,800 in 1995
and $77,400 in 1994. Lower interest charges for the current year trace to
the same terms in the Debt Restructuring Agreement that resulted in the
1995 Forgiveness of Deferred Interest.
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 was
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, first by meeting certain financial performance standards in 1994 and
1995, and then through debt reduction payments which commenced in 1996.
Concerning the second basic problem, a need for currently profitable
operations, it was pointed out earlier that for 1996 the Company was
finally able to show a Net Profit For The Year of $56,000. The successful
completion of the Company's turn-around effort follows the remarkable job
of both surviving with little or no working-capital and also managing to
consistently make slow but steady improvements in financial performance.
While earlier cost-reduction efforts were able to keep the Company alive,
it was only the increase in Sales volume for 1996 that made a profit
possible. The Company must now continue to stimulate still greater use of
its MOSFET-driver and Solid State Relays product lines, as well as its
other mature and newer products. Management is determined to continue
pursuing the goals of further increasing sales and profits, requiring still
greater market awareness of our numerous products. Management hopes to
succeed in this challenge of fostering 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 taken
major steps back from the brink in what now appears to be an accelerating
rate of progress.
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 Company Since
Bernard Kravitz 63 President, Secretary, 1969
Treasurer
Solomon Berkowitz 74 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
Company.
Identity of Executive Officers:
Officer
Name Age Position Since
Bernard Kravitz 63 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
Company's sole officer and any other persons pursuant to which he was
selected as an officer.
Identity of certain significant employees:
The Company 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 Company 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 Company'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 Company.
(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 Company. During 1996, fees of $8,120 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, 1996, all Section 16(a) filing requirements applicable to each person
who, at any time during the fiscal year ended December 31, 1996, 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, 1996, 1995 and
1994, 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, 1996 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
Annual
Compensation(1)
Name and Principal Fiscal
Position Year Salary Bonus
Bernard Kravitz, 1996 $97,400 $0
President 1995 $89,600 $0
1994 $82,200 $0
Long-Term
Compensation
Restricted Shares
Name and Principal Fiscal Stock Underlying
Position Year Awards Options
Bernard Kravitz, 1996 $2,000(2) 0
President 1995 $0 0
1994 $0 0
_________________________
(1) Does not include matching contributions paid by the Company for Mr.
Kravitz during 1994, 1995 and 1996 of $2,466, $2,910 and $3,638,
respectively, pursuant to the Company's Savings and Investment Plan
under section 401(k) of the Internal Revenue Code and premiums paid by
the Company during 1994, 1995 and 1996 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).
(2) On July 1, 1996, the Company awarded to Mr. Kravitz a performance-
related bonus of 200,000 shares of restricted stock. As required by
regulations of the Securities and Exchange Commission, the amount
shown in the table was calculated using the market price of the
Company's unrestricted Common Stock on the date of the award. That
price, $.01 per share, was reported by the OTC Bulletin Board on July
1, 1996 as the actual closing sales price. Further, as of December
31, 1996, the OTC Bulletin Board reported the actual closing sales
price of the Common Stock to be $.17 per share. Although the
restricted stock granted to Mr. Kravitz therefore had an apparent
value of $34,000 as of December 31, 1996 (200,000 multiplied by $.17),
it should be noted that those shares may not be offered for sale, and
may neither be sold nor otherwise transferred except pursuant to an
effective registration statement under the Securities Act of 1933 or
pursuant to an exemption from such registration requirement.
Bonuses and Deferred Compensation:
The Company has an agreement with Bernard Kravitz, the sole officer
and a Director of the Company, 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 Company at the time of his
death. Such arrangements had previously been funded by life insurance
policies owned by the Company on Mr. Kravitz's life, but currently remains
unfunded.
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
Company 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 Company 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 Company 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 Company of
the employ of Mr. Kravitz.
Compensation pursuant to plans:
On July 1, 1985, the Company 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, provides that a member (an eligible employee of the
Company) may elect to save no less than 1% and no more than 15% of that
portion of his compensation attributable to each pay period (subject to
certain limitations). The Company shall contribute (matching
contributions) 100% of the first 3% of the member's contribution and 50% of
the next 2% of the member's contribution. In addition, the Company 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.
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:
Years Percentage
Less than 2 0%
2 25%
3 50%
4 75%
5 or more 100%
See subsection "Summary Compensation Table" elsewhere herein under
Item 10 for information on matching contributions paid by the Company for
Mr. Kravitz during 1994, 1995 and 1996.
Compensation of Directors:
During the fiscal year ended December 31, 1996, the Company's one non-
employee director received no compensation for his services as such and the
Company presently intends that the same will be the case for the fiscal
year ending December 31, 1997.
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 13, 1997, 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:
<PAGE>
Percent(1)
Name and Address Shares Owned of Class
Bernard Kravitz 944,952(2)(3) 25.7%
110-11 Queens Blvd.
Forest Hills, NY
Sherman Gross 339,544(3) 9.2%
848 Newburgh Ave.
Woodmere, NY
Gregory Coleman 269,720 7.3%
59-09 Northern Blvd.
East Norwich, NY
Solomon Berkowitz 15,548 0.4%
15 Story St.
Brooklyn, NY
D.A.N. Joint Venture, 361,080(4) 8.9%(4)
a Limited Partnership
4363 La France Street
Newton Falls, OH
All Directors &
Officers 960,500 26.1%
as a Group (2 persons)
____________________________
(1) Based upon issued and outstanding shares computed as follows:
3,848,222 outstanding shares less 164,544 treasury shares resulting in
3,683,678 issued and outstanding shares.
(2) Includes 932,374 shares of record and 12,578 shares owned by Mrs.
Phyllis Kravitz, Mr. Bernard Kravitz' wife.
(3) Does not include 144,193 shares owned by the Company'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 361,080 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 Company's certificate of incorporation, as amended(1)
3.2 Company'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.
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 24, 1997
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, 3/24/97
Bernard Kravitz Treasurer, Director
(Principal Executive
Officer and Principal
Financial Officer)
/s/Solomon Berkowitz Director 3/24/97
Solomon Berkowitz
<PAGE>
Dionics, Inc.
65 Rushmore Street
Westbury, N.Y. 11590
We have reviewed the accompanying combined balance sheet of Dionics,
Inc., as of December 31, 1996, and the related statement of operations and
cash flows for the year then ended, in accordance with standards
established by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of
the management of Dionics, Inc.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less
in scope than an examination in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order for
them to be in conformity with generally accepted accounting principles.
The accompanying 1995 financial statements of Dionics, Inc. were
compiled 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 1995 financial statements and,
accordingly, do not express an opinion or any other form of assurance on
them.
/s/ERNEST D. LOEWENWARTER & CO. LLP
ERNEST D. LOEWENWARTER & CO. LLP
Certified Public Accountants
New York, N.Y.
February 21, 1997
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
December 31, December 31,
1996 1995
(Unaudited) (Unaudited)
A S S E T S
CURRENT ASSETS:
Cash $ 210,900 $ 147,000
Accounts Receivable Trade
(Less Estimated Doubtful
Accounts of $10,000 in 1996
and $5,000 in 1995) Note 3 230,400 187,400
Inventory - Notes 1 and 3 402,400 354,100
Prepaid Expenses and Other-
Current Assets 30,800 30,900
Total Current Assets 874,500 719,400
PROPERTY, PLANT AND
EQUIPMENT - Note 3
(At Cost Less Accumulated
Depreciation of $1,623,600
in 1996 and $1,526,100 in 1994) 62,700 89,700
DEPOSITS AND OTHER ASSETS -
Note 2 23,100 26,800
Total $ 960,300 $ 835,900
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
December 31, 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) $ 28,200 $ 36,900
Accounts Payable 66,200 48,700
Accrued Expenses 62,400 48,200
Total Current Liabilities 156,800 133,800
Deferred Compensation Payable -
(Note 2) 442,900 386,100
Long-Term Debt Less Current -
Maturities - (Note 3) 829,900 843,300
Total Liabilities 1,429,600 1,363,200
CONTINGENCIES AND COMMENTS
SHAREHOLDERS' EQUITY
Common Shares - $.01 Par Value
Authorized 5,000,000 Shares
Issued 3,848,222 Shares in
1996 and 3,648,222 in 1995 38,400 36,400
Additional Paid-in Capital 1,522,800 1,522,800
(Deficit) (1,809,900) (1,865,900)
(248,700) (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) (469,300) (527,300)
Total $ 960,300 $ 835,900
<PAGE>
DIONICS, INC.
STATEMENT OF OPERATIONS
DECEMBER 31,
1996 1995
(Unaudited)* (Unaudited)*
SALES $1,521,600 $1,360,900
COST AND EXPENSES:
Cost of Sales (Including
Research
and Development Costs) 1,045,800 996,700
Selling, General and
Administrative
Expenses 349,400 320,900
Total Costs and Expenses 1,395,200 1,317,600
NET INCOME FROM OPERATIONS 126,400 43,300
INTEREST AND OTHER INCOME 5,000 3,800
131,400 47,100
OTHER DEDUCTIONS:
Provision for Doubtful
Accounts 5,000 -0-
Interest Expense 70,400 92,800
75,400 92,800
NET INCOME (LOSS) FOR THE YEAR
BEFORE EXTRAORDINARY ITEMS 56,000 (45,700)
EXTRAORDINARY ITEMS:
Forgiveness of Indebtedness -
Loan Payable -0- 167,500
Deferred Interest - 1995 -0- 24,800
Deferred Interest - 1994 -0- 21,000
Total Extraordinary Items -0- 213,300
NET INCOME FOR THE YEAR $ 56,000 $167,600
NET INCOME (LOSS) PER SHARE:
Before Extraordinary Items $ .015 $ (.013)
From Extraordinary Items .000 .061
Total Per Share $ .015 $ .048
Average Number of Shares
Outstanding Used in
Computation of Per Share
Income (Loss) 3,683,678 3,483,678
*See Accountants letter
<PAGE>
DIONICS, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31,
1996 1995
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income $ 56,000 $167,600
Adjustment to Reconcile Net Income
to Net Cash Provided from
Operating Activities:
Depreciation and Amortization 29,400 68,100
Provision for Loss on Account
Receivable 5,000 -0-
Deferred Compensation and
Related Interest 56,800 53,500
Forgiveness of Loan Indebtedness -0- (167,500)
Forgiveness of Interest
Indebtedness
Prior Year -0- (21,000)
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Account
Receivable (48,000) 49,100
(Increase) Decrease in Inventory (48,300) (55,800)
(Increase) Decrease in Prepaid
Expenses
and Other Current Assets 100 (1,300)
(Increase) Decrease in Deposits and
Other
Assets 3,700 2,200
(Decrease) in Accounts Payable (17,500) (27,200)
(Decrease) in Accrued Expenses (14,200) (1,200)
Net Cash Provided from Operating
Activities 86,400 66,500
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (2,400) -0-
CASH FLOWS FROM FINANCIAL ACTIVITIES:
Capital Stock Issued 2,000 -0-
Repayment of Debt (22,100) (4,400)
NET INCREASE IN CASH 63,900 62,100
CASH - Beginning of Year 147,000 84,900
CASH - End of Year $ 210,900 $ 147,000
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 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:
December 31, December 31,
1996 1995
(Unaudited) (Unaudited)
Finished Goods $ 62,500 $ 25,200
Work-in-Process 233,700 236,900
Raw Materials 69,300 50,300
Manufacturing Supplies 36,900 41,700
Total $402,400 $354,100
<PAGE>
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, 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
DECEMBER 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 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
DECEMBER 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
DECEMBER 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 from the Bank by D.A.N. Joint Venture, a Limited Partnership, an
affiliate of the Cadle Company.
<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,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 210,900
<SECURITIES> 0
<RECEIVABLES> 230,400
<ALLOWANCES> 0
<INVENTORY> 402,400
<CURRENT-ASSETS> 874,500
<PP&E> 1,686,300
<DEPRECIATION> 1,623,600
<TOTAL-ASSETS> 960,300
<CURRENT-LIABILITIES> 156,800
<BONDS> 1,272,800
<COMMON> 38,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 960,300
<SALES> 1,521,600
<TOTAL-REVENUES> 1,521,600
<CGS> 1,045,800
<TOTAL-COSTS> 1,395,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,000
<INTEREST-EXPENSE> 70,400
<INCOME-PRETAX> 56,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 56,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,000
<EPS-PRIMARY> .015
<EPS-DILUTED> .015
</TABLE>
