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, 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 August 1, 1997
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended June 30, 1997
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, 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 six months ended June 30, 1997 are not
necessarily indicative of the results of operations for the full fiscal year
ending 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.
COMBINED BALANCE SHEET
June 30, December 31,
1997 1996
(Unaudited) (Unaudited)
A S S E T S
CURRENT ASSETS:
Cash $ 320,100 $ 210,900
Accounts Receivable Trade
(Less Estimated Doubtful Accounts
of $10,000 in 1997 and $10,000 in
1996) - Note 3 270,800 230,400
Inventory - Notes 1 and 3 384,700 402,400
Prepaid Expenses and Other Current
Assets 24,500 30,800
Total Current Assets 1,000,100 874,500
PROPERTY, PLANT AND
EQUIPMENT - Note 3
(At Cost Less Accumulated
Depreciation of $1,629,800
in 1997 and $1,623,600 in 1996) 56,500 62,700
DEPOSITS AND OTHER ASSETS -
Note 2 22,000 23,100
Total $1,078,600 $ 960,300
<PAGE>
DIONICS, INC.
COMBINED BALANCE SHEET
June 30, 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) $ 28,400 $ 28,200
Accounts Payable 72,100 66,200
Accrued Expenses 75,100 62,400
Total Current Liabilities 175,600 156,800
Deferred Compensation Payable -
(Note 2) 473,000 442,900
Long-Term Debt Less Current
Maturities - (Note 3) 815,500 829,900
Total Liabilities 1,464,100 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 in 1996 38,400 38,400
Additional Paid-in Capital 1,522,800 1,522,800
(Deficit) (1,726,100) (1,809,900)
(164,900) (248,700)
Less: Treasury Stock at Cost
164,544 Shares in 1997 and
164,544 Shares in 1996 (220,600) (220,600)
Total Shareholders' Equity (Deficit) (385,500) (469,300)
Total $1,078,600 $ 960,300
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
SALES $ 503,200 $ 342,800
COST AND EXPENSES:
Cost of Sales (Including
Research and Development Costs) 339,800 233,200
Selling, General and Administrative
Expenses 95,700 77,800
Total Costs and Expenses 435,500 311,000
NET INCOME FROM OPERATIONS 67,700 31,800
INTEREST AND OTHER INCOME 2,500 1,200
70,200 33,000
OTHER DEDUCTIONS
Interest Expenses 18,200 18,100
NET INCOME FOR THE PERIOD $ 52,000 $ 14,900
NET INCOME PER SHARE $ .014 $ .004
Average Number of Shares Outstanding
Used in Computation of
Per Share Income 3,683,678 3,483,678
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED
JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
SALES $ 929,600 $ 684,800
COST AND EXPENSES:
Cost of Sales (Including Research
and Development Costs) 637,800 486,200
Selling, General and Administrative
Expenses 175,700 166,700
Total Costs and Expenses 813,500 652,900
NET INCOME FROM OPERATIONS 116,100 31,900
INTEREST AND OTHER INCOME 4,200 2,400
120,300 34,300
OTHER DEDUCTIONS:
Interest Expense 36,500 36,300
NET INCOME (LOSS) FOR THE PERIOD $ 83,800 $ (2,000)
NET INCOME (LOSS) PER SHARE $ .022 $ (.0006)
Average Number of Shares Outstanding
Used in Computation of Per Share
Income (Loss) 3,683,678 3,483,678
<PAGE>
DIONICS, INC.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 83,800 $ (2,000)
Adjustment to Reconcile Net Income
or (Loss) to Net Cash
Used for Operating Activities:
Depreciation and Amortization 6,200 14,700
Deferred Compensation and
Related Interest 30,100 28,400
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (40,400) (8,300)
(Increase) Decrease in Inventory 17,700 (31,300)
Decrease in Prepaid Expenses and
Other Current Assets 6,300 12,200
Decrease in Deposits and Other Assets 1,100 1,000
Increase in Accounts Payable 5,900 15,900
Increase in Accrued Expenses 12,700 13,500
Net Cash Provided by Operating Activities 123,400 44,100
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt (14,200) (8,100)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment -0- (2,400)
NET INCREASE IN CASH 109,200 33,600
CASH - Beginning of Period 210,900 147,000
CASH - End of Period $ 320,100 $ 180,600
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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:
June 30, December 31,
1997 1996
(Unaudited) (Unaudited)
Finished Goods $ 44,100 $ 62,500
Work-in-Process 184,400 233,700
Raw Materials 129,500 69,300
Manufacturing Supplies 26,700 36,900
Total $384,700 $402,400
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
JUNE 30, 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 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, 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 out in the January 3, 1994 Debt
Restructuring Agreement, the Company has qualified in full for the
forgiveness of specific elements of its debt. While according to the
terms of the Agreement, the actual forgiveness is due to be formally
granted on "the interim Maturity Date" (Jan. 31, 1999), the Company has,
in the interests of more accurately describing its over-all debt situation,
decided to adopt those changes in its current and future reports. The
forgiveness will cover all of the principal and accrued interest on Term
Loan D and all of the accrued interest on both Term Loans A and C, as more
fully described in the above-referenced Debt Restructuring Agreement.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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
The Company has been steadily improving its financial performance for the
last several years. Although it was at first still recording losses, each
year's performance had resulted in a smaller loss than in the previous year.
In the most recent full year, 1996, the Company finally achieved a Profit
before the benefit of any Extraordinary Items, the first such Profit in many
years. With a profitable First Quarter in 1997, the Company was able to
continue that improving trend, and now for the Second Quarter of 1997 has
produced an even more impressive result.
Along with upgrading its 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. Through the
extremely beneficial restructuring of its Bank debt, effective January 31,
1994, and the successful capture of several additional debt-reduction
opportunities, the Company has significantly eased its over-all debt profile.
The recent strengthening of the Company's Liquidity and Capital Resources are
at least partially evident in its improved ratio of Current Assets to Current
Liabilities. Starting with 1.83 at June 30, 1994, the ratio rose to 5.54 at
June 30, 1995, then down slightly to 5.06 at June 30, 1996 and currently is at
5.70 at June 30, 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 debt or equity-based
capital to provide further growth momentum for the Company, and to refinance
its remaining long-term debt. 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, however, 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 the Balance Sheet item Working Capital, which
continued to rise to $824,500 at June 30, 1997, up from $717,700 at December
31, 1996, $626,200 at June 30, 1996, $533,900 at June 30, 1995 and $245,500
at June 30, 1994.
B. RESULTS OF OPERATIONS
Sales in the Second Quarter of 1997 rose 46.8% from the same period last
year, reaching $503,200 in the current period as compared to $342,800 in the
Second Quarter of 1996 and $318,800 in the Second Quarter of 1995. The
current rise in sales volume occurred across numerous product lines, rather
than any single one, reflecting a general increase in customer interest.
The Gross Profit margin in the Second Quarter of 1997 was 32.5%, as compared
to 32% in the Second Quarter of 1996 and 34% in the Second Quarter of 1995.
The greater efficiency that increasing sales volumes can provide against a
background of many largely fixed costs may soon lead to even higher Gross
Profit Margins.
Selling, General & Administrative costs fell as a percentage of sales
volume to 19.0% in the Second Quarter of 1997 as compared to 22.7% in the
same period last year, and 23.7% in the same period of 1995. The decrease
in the current period SG & A percentage came about largely through a
reduction in depreciation charges combined with increasing sales volume.
As a result of the above improvements, the Company showed a 112%
increase in Second Quarter 1997 NET INCOME FROM OPERATIONS with $67,700
as compared to $31,800 in the same period last year, and $33,700 in the
Second Quarter of 1995. Interest Expenses have not changed materially
in the last several consecutive quarterly reporting periods: $18,200 in
the current period, $18,100 in the Second Quarter of 1996, and $22,900 in
the Second Quarter of 1995.
For the Second Quarter of 1997, the Company recorded a 248% increase
in NET INCOME with $52,000 as compared to a NET INCOME of $14,900 in the
same period of 1996 and a NET INCOME of $11,900 in the First Quarter of 1995.
In the First Half of 1997, the Company recorded a 35.6% increase in
Sales volume, showing $929,600 as compared to $684,800 for the First Half
of 1996. The Gross Profit Margin rose for the First Half of 1997 to 31.4%
as compared to 29.0% in the same period last year. Selling, General and
Administrative Expenses dropped to 18.9% of Sales as compared to 24.3% in
the First Half of 1996. The Company showed a 264% increase in NET INCOME
FROM OPERATIONS with $116,100 in the First Half of 1997 as compared to
$31,900 in the First Half of 1996. Interest Expenses remained essentially
the same, with $36,500 in the current period and $36,300 in the First Half
of 1996. As a result of the above, the Company showed NET INCOME of
$83,800 for the First Half of 1997, as compared to a NET LOSS of $2,000 for
the First Half of 1996.
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 1994 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 was even
able to further reduce the debt under that Agreement, first by meeting
certain financial performance requirements for both 1994 and 1995, resulting
in substantial debt forgiveness, and then through the scheduled monthly debt-
reduction payments that began in early 1996.
Concerning the Company's second basic problem, the need for currently
profitable operations, it succeeded in 1996 in registering its first annual
Net Profit in many years. Now, with the strong First Half 1997 results,
the Company is further bolstering its turn-around. These currently
profitable results follow the Company's remarkable job of having both
survived with little or no Working Capital and also having consistently
made slow but steady improvements in financial performance. While cost
reduction efforts were able to keep the Company alive, only steadily rising
sales volume will be able to make increasing profits possible. The
Company is continuing its efforts to stimulate increasing use of its
MOSFET-driver and Solid State Relay product lines, as well as several other
mature and newer products. The prospects are currently strong for further
improvements in both Sales volume and Net Profits, goals that Management
<PAGE>
is determined to continue pursuing. Management hopes to succeed in the
latest challenge of fostering increasing 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's recent strong
performance represents 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 June
30, 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: August 7, 1997 By: /s/Bernard Kravitz
Bernard Kravitz,
President
Dated: August 7, 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 JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 320,100
<SECURITIES> 0
<RECEIVABLES> 270,800
<ALLOWANCES> 0
<INVENTORY> 384,700
<CURRENT-ASSETS> 1,000,100
<PP&E> 1,686,300
<DEPRECIATION> 1,629,800
<TOTAL-ASSETS> 1,078,600
<CURRENT-LIABILITIES> 175,600
<BONDS> 1,288,500
<COMMON> 38,400
0
0
<OTHER-SE> 1,522,800
<TOTAL-LIABILITY-AND-EQUITY> 1,078,600
<SALES> 929,600
<TOTAL-REVENUES> 929,600
<CGS> 637,800
<TOTAL-COSTS> 813,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,500
<INCOME-PRETAX> 83,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 83,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,800
<EPS-PRIMARY> .022
<EPS-DILUTED> .022
</TABLE>
