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 SEPTEMBER 30, 2000
[ ] 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 November 1, 2000
(excluding 164,544 treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
DIONICS, INC.
Index to Financial Information
Period Ended September 30, 2000
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 14
<PAGE>
DIONICS, INC.
September 30, 2000
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 nine months ended September 30, 2000
are not necessarily indicative of the results of operations for the full
fiscal year ending December 31, 2000.
These condensed statements should be read in conjunction with the
Company's financial statements for the year ended December 31, 1999.
<PAGE>
DIONICS, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED) (UNAUDITED)
A S S E T S
CURRENT ASSETS:
Cash $ 718,500 $ 526,500
Accounts Receivable - Trade
(Less Estimated Doubtful Accounts
of $10,000 in 2000 and $10,000 in
1999) - (Note 2) 359,600 357,000
Inventory - (Notes 2 and 3) 682,100 648,100
Prepaid Expenses and Other Current
Assets 21,700 30,700
Total Current Assets 1,781,900 1,562,300
PROPERTY, PLANT AND
EQUIPMENT - (Notes 2 and 4)
(At Cost Less Accumulated
Depreciation of $1,659,400
in 2000 and $1,651,200 in 1999) 83,500 82,000
DEPOSITS AND OTHER ASSETS -
(Notes 2 and 4) 50,300 49,300
Total $1,915,700 $1,693,600
<PAGE>
DIONICS, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED) (UNAUDITED)
L I A B I L I T I E S
CURRENT LIABILITIES:
Current Portion of Long-Term
Debt - (Note 5) $ 93,800 $ 93,600
Accounts Payable 81,400 101,000
Accrued Expenses 71,500 65,600
Deferred Compensation Payable -
Current (Note 4) 238,100 226,200
Total Current Liabilities 484,800 486,400
Deferred Compensation Payable -
(Note 4) Non Current 421,400 393,900
Long-Term Debt Less Current
Maturities - (Note 5) 660,300 703,900
Total Liabilities 1,566,500 1,584,200
CONTINGENCIES AND COMMENTS
SHAREHOLDERS' EQUITY
Common Shares - $.01 Par Value
Authorized 5,000,000 Shares
Issued 3,848,222 Shares in
2000 and 3,848,222 in 1999
(Note 6) 38,400 38,400
Additional Paid-in Capital 1,522,800 1,522,800
Accumulated (Deficit) (991,400) (1,231,200)
569,800 330,000
Less: Treasury Stock at Cost
164,544 Shares in 2000 and
164,544 Shares in 1999 (220,600) (220,600)
Total Shareholders' Equity 349,200 109,400
Total $1,915,700 $1,693,600
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
(UNAUDITED) (UNAUDITED)
SALES $ 617,400 $ 433,100
COST AND EXPENSES:
Cost of Sales (Including Research
and Development Costs) 402,400 305,200
Selling, General and Administrative
Expenses 114,500 94,300
Total Costs and Expenses 516,900 399,500
NET INCOME FROM OPERATIONS 100,500 33,600
DIVIDENDS AND OTHER INCOME 7,000 20,600
107,500 54,200
OTHER DEDUCTIONS:
Interest Expense 25,900 23,400
NET INCOME FOR THE PERIOD BEFORE PROVISION
FOR INCOME TAXES 81,600 30,800
PROVISION FOR INCOME TAXES 2,000 -0-
NET INCOME FOR THE PERIOD $ 79,600 $ 30,800
NET INCOME PER SHARE -
Basic $ .0216 $ .0084
Diluted $ .0215 $ .0083
Average Number of Shares Outstanding
Used in Computation of Per Share Income
Basic 3,683,678 3,683,678
Diluted 3,693,293 3,720,253
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
(UNAUDITED) (UNAUDITED)
SALES $1,743,800 $1,438,300
COST AND EXPENSES:
Cost of Sales (Including
Research and Development Costs) 1,114,400 978,700
Selling, General and Administrative
Expenses 330,500 280,600
Total Costs and Expenses 1,444,900 1,259,300
NET INCOME FROM OPERATIONS 298,900 179,000
DIVIDENDS AND OTHER INCOME 20,000 31,900
318,900 210,900
OTHER DEDUCTIONS
Interest Expense 77,100 68,000
NET INCOME BEFORE PROVISION
FOR INCOME TAXES 241,800 142,900
Provision for Income Taxes 2,000 -0-
NET INCOME FOR THE PERIOD $ 239,800 $ 142,900
NET INCOME PER SHARE -
Basic $ .0651 $ .0388
Diluted $ .0629 $ .0385
Average Number of Shares Outstanding
Used in Computation of Per Share Income -
Basic 3,683,678 3,683,678
Diluted 3,811,291 3,713,613
<PAGE>
DIONICS, INC.
CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 239,800 $ 142,900
Adjustment to Reconcile Net Income to
Net Cash Provided from Operating Activities:
Depreciation and Amortization 5,600 4,700
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (2,600) (67,900)
(Increase) in Inventory (34,000) (121,000)
(Increase) Decrease in Prepaid Expenses and
Other Current Assets 9,000 3,300
(Increase) Decrease in Deposits and
Other Assets (1,000) 2,400
Increase (Decrease) in Accounts Payable (19,600) 42,000
Increase (Decrease) in Accrued Expenses 5,900 (22,700)
Increase (Decrease) in Deferred Compensation
Payable 53,200 (39,700)
Net Cash Provided from (Used In) Operating
Activities 256,300 (56,000)
CASH FLOWS (USED IN) FINANCING ACTIVITIES:
Repayment of Debt (43,400) (47,700)
CASH FLOWS (USED IN) INVESTING ACTIVITIES:
Purchase of Equipment (7,100) (39,700)
Payment of Deferred Compensation (13,800) -0-
NET (DECREASE) INCREASE IN CASH 192,000 (143,400)
CASH - Beginning of Period 526,500 606,100
CASH - End of Period $ 718,500 $ 462,700
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 - BUSINESS:
The Company designs, manufactures and sells silicon semiconductor
electronic products, as individual discrete components, as multi-component
integrated circuits and as multi-component hybrid circuits.
The individual discrete components are predominantly transistors, diodes and
capacitors, intended for use in miniature circuit assemblies called "hybrid
microcircuits".
Due to the rapidly changing needs of the marketplace, there are continual
shifts in popularity among the various chip components offered by the
Company. Taken as a whole, 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.
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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
Assets, liabilities, revenues and expenses are recognized on the accrual
basis of accounting.
Cash and Cash Equivalents
The Company considers money market funds to be cash equivalents.
Merchandise 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.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Property, Plant and Equipment
Property, Plant and Equipment is stated at cost less accumulated
depreciation and amortization. Expenditures for renewals and improvements
that significantly extend the useful life of assets are capitalized for all
assets; depreciation is provided over the estimated useful lives of the
individual asset, using the straight- line method. The following asset
lives are in effect:
Machine and Equipment 8 Years
Testing Equipment 8 Years
Furniture and Fixtures 10 Years
Building Improvements 10 Years
Building 25 Years
Deferred Compensation Plan
Future payments required under a plan of deferred compensation adopted in
1987, and revised in 1999 as well as interest accrued thereon are being
charged to operations over the period of expected service.
Bad Debts
The Company maintains a constant allowance for doubtful accounts of $10,000.
Deferred Mortgage Costs
Costs related to the First Union Small Business Capital (formerly Money
Store Commercial Mortgage) and prior costs related to the paid off mortgage
with D.A.N. Joint Venture are being amortized as follows:
a) New Costs $35,800 360 Months Starting 1/l/1999
b) Unamortized Prior Cost 16,200 94 Months
$52,000
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 3 - INVENTORY:
Inventories are 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:
September 30, December 31,
2000 1999
(Unaudited) (Unaudited)
Finished Goods $ 29,100 $ 27,800
Work-in-Process 357,800 339,900
Raw Materials 135,700 128,900
Manufacturing Supplies 159,500 151,500
Total $682,100 $648,100
NOTE 4 - DEFERRED COMPENSATION PAYABLE:
In 1987 the Company entered into an agreement, amended in 1997 and 1998,
which provides for a 72 month schedule of payments to its chief executive
officer.
In connection with the refinancing of the Money Store Loan (see Note 5) a
modified deferred compensation payment schedule commencing January 1, 1999
was agreed to by the Company and it's chief executive officer.
The Company executed a mortgage subordinate to the existing first mortgage
(see note 5) secured by land and building at 65 Rushmore Street, Westbury,
New York in favor of the chief executive officer to insure amounts due him
on the deferred compensation agreement.
A new 72 month schedule consists of a 24 month period of reduced consecutive
monthly payments, to be followed by an 18-month period of no payments except
for monthly interest. At the end of the 42nd month, the total of the delayed
payments becomes due followed by 30 months of principal and interest
payments.
Notwithstanding the above schedule for payments, other than a life insurance
policy to cover death benefits, the Company has not specifically designated
funds with which to meet these payment requirements. In view of its
continuing total indebtedness as well as its need for operating capital,
there can be no assurance that the Company will be able to satisfy the terms
of this new agreement in full or in part. Should such unfavorable
circumstances occur, the terms of the agreement may have to again be
renegotiated to better match the Company's then-current financial
circumstances. The previously mentioned Life Insurance policy had a cash
surrender value at September 30, 2000 of approximately $7,000, which is
included in other assets.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 5 - LOANS PAYABLE -
First Mortgage Loan:
A new loan agreement was entered into between Dionics, Inc. and the First
Union Small Business Capital (formerly Money Store Commercial Mortgage Inc.)
effective 12/31/1998.
The loan in the principal amount of $384,685 requires 360 monthly self
liquidating payments. Interest is calculated on the unpaid principal
balance at an initial rate of 8.23% per annum. The interest rate on the
loan is variable depending on an independent index related to the yield of
United States Treasury Notes. This rate change will occur once every 60
months.
$358,232 of the above proceeds were used to satisfy the balance of the
Mortgage due D.A.N. Joint Venture in full.
Term Loans:
Term Loan A - Due D.A. N. Joint Venture.
Certain 1990 loans were 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 ended 3/31/99, the Company paid interest only.
During the second five-year period commencing 4/1/99 the balance due is
being repaid over 60 equal monthly installments, plus interest at prime plus
two percent on the unpaid balance.
Term Loan C - Due D.A. N. Joint Venture.
Another 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 the
Paragraph above.
In conjunction with the refinancing of the old mortgage D.A.N. Joint Venture
confirmed and acknowledged that the old mortgage note was paid in full, that
all accrued interest above the 2% stated rate and the principal and any
accrued interest on Term Loan C was forgiven, discharged and cancelled.
<PAGE>
DIONICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 6 - STOCK OPTION PLAN
In September 1997, the Board of Directors of the Company adopted the 1997
Incentive Stock Option Plan (the "1997 Plan") for employees of the Company
to purchase up to 250,000 shares of common Stock of the Company. Options
granted under the 1997 plan are "incentive stock options" as defined in
Section 422 of the Internal Revenue Code. Any stock options granted under
the 1997 Plan shall be granted at no less than 100% of the fair market value
of the Common Stock of the Company at the time of the grant. As of
September 30, 2000, options to acquire 120,000 shares of Common Stock have
been granted under the 1997 Plan. All of such options were granted on
September 11, 1997 and have an exercise price of $.38 per share. As of
September 30, 2000, 130,000 options were available for future grant.
NOTE 7 - INCOME TAXES:
As of December 31, 1999 the Company had available a federal operating loss
carry forward of $318,000. This net operating loss originated in 1990
through 1992 and may be carried forward and expires as follows:
Year of Origin Amount Carry Forward
Expires In
1990 $ 19,200 2005
1991 65,600 2006
1992 233,200 2007
$318,000
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
A. LIQUIDITY AND CAPITAL RESOURCES
The First Nine-Months of Year 2000 saw the Company continue to show
improved financial performance, in what is now anticipated will be its
fifth consecutive year of increasing Sales and Profits. The Company has
been undergoing a slow "turnaround," tracing as far back as 1991, when
financial problems almost forced it out of business. The intervening years
have seen the Company "pull itself up by the bootstraps" in numerous ways,
including: payroll cutbacks; the sale of one of its two buildings;
consolidation of operations into its one remaining building; favorable
restructuring of its bank debts; and more recently, the refinancing of its
building mortgage loan and the clearing of a large "balloon" payment on its
previous mortgage.
Further, as a requirement of the mortgage refinancing process, the
Company's property underwent an independent appraisal that showed it to
have a then-current market value that was $750,000 higher than the heavily-
depreciated value on the Company's balance sheet. This suggests that the
"true" Net Worth of the Company as of September 30, 2000 is approximately
$1,099,200 instead of $349,200 arrived at by more conventional accounting
methods.
During the Year 2000, the Company will continue to face certain new
payment obligations that will require it to make substantial use of its
Cash resources. (See Notes 4 and 5 in the financial statement.) Commencing
in April 1999 the Company entered the five-year pay-down phase of its
$451,350 Bank loan. These payments are in addition to the recently reduced
monthly obligations of the Deferred Compensation Agreement, effective
January 1, 1999. At present, although the effects of the above obligations
represent substantial cash requirements, it is Management's opinion that
current cash reserves plus anticipated cash-flow from operations should
permit them to be met.
Notwithstanding the Company's excellent financial condition at
year-end 1999, it was concluded by Management that in view of the Company's
near-term cash-needs for debt and other obligations, the expenditure of a
significant portion of its cash resources for an independently-audited
year-end financial statement would still not be prudent. Instead, as in
1998, the Company used its non-independent accounting firm for that filing.
The Company learned on March 10, 2000, only 20 days before the SEC's
required filing date for its year-end report, that lack of a much more
costly "independently-audited" financial report would now prevent the
Company's stock from being compliant with recently-tightened OTC Bulletin
Board eligibility requirements, thus resulting in its being de-listed.
Since the late notification left no calendar-time to effect any "cure" of
the problem, the Company's stock was in fact de-listed on April 10th.
Quotations for the stock are now reported on the National Quotation
Bureau's "Pink Sheets." The Company is considering its options for possibly
curing the Bulletin Board eligibility issue.
A further benefit of the Company's slow but steady improvement over
the last several years has been the upgrading of its Net Worth. As far back
as 1992 the Company's Net Worth was a negative $1,273,000; by year-end 1999
it had progressed to a positive $109,400. In addition, as was noted
earlier, the recent appraisal of the Company's real estate property showed
the "true" Net Worth to be higher by $750,000, for a year-end 1999 value of
a positive $859,400. Again, as shown earlier,
<PAGE>
by September 30, 2000 the balance sheet Net Worth had advanced to a
positive $349,200 and the "true" Net Worth to approximately a positive
$1,099,200.
Working Capital at September 30, 2000 increased to $1,297,100, as
compared to $1,002,800 at September 30, 1999. Management has also continued
its search for additional Working Capital to provide further growth
momentum for the Company. Contacts are always active with several potential
lenders or investors, although no assurance of success can be given. For
the immediate future, at least, the Company is well able to support its
ongoing operations.
B. RESULTS OF OPERATIONS
Sales in the Third Quarter of 2000 rose 42.5 percent from the same
period last year, reaching $617,400 in the current period versus $433,100
in the Third Quarter of 1999. Rising sales volumes are reflective of
increased orders on many of the company's product lines.
Gross Profit in the Third Quarter of 2000 was 34.8 percent, as
compared to 29.5 percent in the Third Quarter of 1999. Selling, General &
Administrative Expenses in the Third Quarter of 2000 were 18.6 percent of
Sales, as compared to 21.8 percent in the same period last year. Both
categories benefitted from the increased Sales volume.
In the Third Quarter of 2000, the Company showed a Net Profit from
Operations of $100,500 as compared to $33,600 in the Third Quarter of 1999.
After accounting for Interest and Other Income and Taxes, the Company
showed a NET PROFIT of $81,600 in the Third Quarter of 2000 as compared to
$30,800 in the Third Quarter of 1999.
For the First Nine-Months of 2000, Sales volume rose 21 percent,
reaching $1,743,800 as compared to $1,438,300 in the First Nine-Months of
1999. Gross Profit Margin was 35.8 percent in the current period as
compared to 31.9 percent in the same period last year. Selling, General &
Administrative Expenses were 18.9 percent of Sales in the current period as
compared to 19.5 percent in the same period last year.
For the First Nine-Months of 2000, the Company showed a Net Profit
of $239,800, up 67.8 percent from the $142,900 level of the same period in
1999. These totals correctly show the benefits of the year-earlier
establishment of the Company's outsourcing program as well as higher levels
of new orders.
Addressing the bigger, longer-term picture, the Company has
continued to deal successfully with its debt situation as well as the need
for currently profitable operations. The strategy of increased outsourcing
appears to be succeeding, although at the cost of an increased level of Raw
Material and Work-in-Process inventory. Fortunately, the Company is able to
support such increases.
The Company is also devoting increased efforts towards re-
establishing a national Sales Representative staff. This should lead to
increased sales for both its photovoltaic Solid State Relays
and MOSFET-drivers, the latter product line showing particular promise in
the growing field of medical electronics. As always, risks of failure
persist but the Company, having struggled back from
<PAGE>
the brink of failure, appears ever closer to the brink of success.
THE PRECEDING TEXT CONTAINS FORWARD-LOOKING STATEMENTS WHICH
REFLECT MANAGEMENT'S BEST JUDGMENT OF CURRENTLY AVAILABLE INFORMATION.
SHOULD CERTAIN ASSUMPTIONS FAIL TO MATERIALIZE, OR UNEXPECTED ADVERSE
EVENTS OCCUR, THE COMPANY MAY NOT REACH MANAGEMENT'S GOALS.
<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 September 30, 2000:
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: November 13, 2000 By: /s/Bernard Kravitz
Bernard Kravitz,
President
Dated: November 13, 2000 By: /s/Bernard Kravitz
Bernard Kravitz,
Principal Financial Officer
