UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to              

Commission file number 000-08161

DIONICS, INC.

(Exact name of Registrant as Specified in its Charter)

Delaware (State or other jurisdiction of incorporation or organization) 11-2166744 (I.R.S. Employer Identification Number)

65 Rushmore Street Westbury, New York (Address of principal executive offices)
11590 (Zip Code)

(516) 997-7474

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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   [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   [ X ]   No   [    ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	[   ]	Accelerated filer	[    ]
Non-accelerated filer	[   ]	Smaller reporting company	[ X ]

Indicate by check mark whether the Issuer is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes   [    ]   No   [  X  ]

State the number of shares outstanding of each of the Issuer’s classes of common equity, as of the latest practicable date: The number of shares outstanding of the Common Stock ($.01 par value) of the Issuer as of the close of business on May 11, 2012 was 25,633,290.

DIONICS, INC.

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements.	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18
	Item 4.	Controls and Procedures.	18
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings.	19
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	19
	Item 3.	Default upon Senior Securities.	19
	Item 4.	Mine Safety Disclosures.	19
	Item 5.	Other Information.	19
	Item 6.	Exhibits.	19
			19
SIGNATURES			20

2

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

DIONICS, INC.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Period Ended March 31, 2012
	Page
Balance Sheets as of March 31, 2012 (unaudited) and  December 31, 2011 (audited)	4
Statements of Operations for the three months ended  March 31, 2012 (unaudited) and March 31, 2011 (unaudited)	5
Statements of Cash Flows for the three months ended  March 31, 2012 (unaudited) and March 31, 2011 (unaudited)	6
Notes to the Financial Statements	7-15

3

DIONICS, INC. BALANCE SHEETS
		March 31, 2012		December 31, 2011
		(Unaudited)		(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	98,300	$	23,000
Accounts receivable - net of allowance of $1,300 in 2012 and $2,000 in 2011		24,400		38,600
Inventory		109,100		99,700
Prepaid expenses		10,200		13,200
Total Current Assets		242,000		174,500
Property, plant and other equipment, net of accumulated depreciation of $1,431,500 in 2012 and $1,431,000 in 2011		14,300		14,800
Other assets		21,100		21,100
TOTAL ASSETS	$	277,400	$	210,400
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	84,100	$	118,000
Accrued expenses		27,000		17,200
Demand Promissory Notes, Officer		104,100		104,100
Total Current Liabilities		215,200		239,300
Loan from Investors		200,000		0
TOTAL LIABILITIES		415,200		239,300
Stockholders' equity
Common Stock/$.01 par value, 50,000,000 shares authorized, shares issued       and outstanding - 25,797,834 in 2012 and in 2011		258,000		258,000
Preferred Stock/$.01 par value, 1,000,000 shares authorized, 0 shares issues       and outstanding		0		0
Additional paid in capital		2,644,900		2,644,900
Accumulated Deficit		(2,820,100)		(2,711,200)
Less: Treasury Stock at cost (164,544 Shares in 2012 and 2011)		(220,600)		(220,600)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(220,600)		(220,600)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	194,600	$	18,700

The accompanying notes are an integral part of the financial statements.

4

DIONICS, INC. STATEMENTS OF OPERATIONS For the three months ended March 31, (Unaudited)
		2012		2011
Net sales	$	107,400	$	116,000
Cost of sales		123,000		128,500
Gross profit (loss)		(15,600)		(12,500)
Selling, general and administrative expenses		93,400		114,700
(Loss) from operations		(109,000)		(127,200)
Other income		100		0
Interest expense		0		0
Net (loss) before income taxes		(108,900)		(127,200)
Income taxes		0		0
Net (loss)	$	(108,900)	$	(127,200)
(Loss) per share	$	(0.004)	$	(0.006)
Weighted average number of shares outstanding		25,797,834		22,159,889

The accompanying notes are an integral part of the financial statements.

5

DIONICS, INC. STATEMENTS OF CASH FLOWS For the three months ended March 31, (unaudited)
		2012		2011
Cash flows from operating activities:
Net income (Loss)	$	(108,900)	$	(127,200)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		500		600
Allowance for Bad debt		(700)		(3,500)
Change in operating assets and liabilities:
(Increase) Decrease in:
Accounts receivable		14,900		32,600
Prepaid expenses		3,000		3,900
Inventory		(9,400)		(4,000)
Increase (Decrease) in:
Accounts payable		(33,900)		18,700
Accrued expenses		9,800		6,600
Net cash (used for) operating activities		(124,700)		(72,300)
Cash flow provided by financing activities:
Proceeds from Sale of Common Stock		0		50,000
Loan from Investors		200,000
Net cash provided by financing activities		200,000		50,000
Net increase (decrease) in cash		75,300		(22,300)
Cash at beginning of period		23,000		86,500
Cash at end of period	$	98,300	$	64,200

The accompanying notes are an integral part of the financial statements.

6

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BUSINESS

Dionics, Inc. (the “Company”) was incorporated under the laws of the State of  Delaware on December 19, 1968.  The Company, which is based in Westbury, New York, designs, manufactures and markets semiconductor electronic products, as individual discrete components, as multi-component integrated circuits, as multi-component hybrid circuits and as silicon light-chips.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with general accepted accounting principals requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and cash equivalents

Holdings of highly liquid investments with original maturities of three months or less are considered to be cash equivalents.  The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair values.  The amount of federally insured cash deposits was $96,900 as of March 31, 2012 and $21,600 as of December 31, 2011.

Concentration of Risk

The Company maintains cash deposits in a bank with offices located in New York, that at times, exceed applicable insurance limits. The Company performs periodic reviews of the relative credit rating of its bank to lower its risk.  The Company has not experienced any losses in such accounts, and believes it is not subject to any significant credit risk on cash.

Accounts Receivable

Accounts for which no payments have been received for three consecutive months are considered delinquent and a reserve is setup for them.  Customary collection efforts are initiated and an allowance for uncollectible amounts is set up and the related expense is charged to operations.

Merchandise 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. Finished goods and work-in-process inventories include material and labor.  The Company monitors usage reports to determine if the carrying value of any items should be adjusted down due to lack of demand for the item.  The Company adjusts down the inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.  If actual market conditions are less favorable than those projected by management, additional inventory write-down may be required.                                     

Inventories are comprised of the following:

	March  31,	December 31,
	2012	2011
Raw materials	$                      0	$                      0
Work in process	65,500	60,800
Finished Goods	43,600	38,900
	$           109,100	$             99,700

7

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

Long-Lived Assets – Property, Plant and Equipment

These assets are recorded at cost less depreciation and amortization.  Depreciation and Amortization are accounted for on the straight-line methods based on estimated useful lives.  The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement.  Betterments and large renewals, which extend the life of the asset, are capitalized whereas maintenance and repairs and small renewals are expensed, as incurred.  The estimated useful lives are: machinery and equipment, 7-15 years; buildings, 30 years; and leasehold improvements, 10-20 years.  

Revenue

The Company recognizes revenue upon completion and shipment of goods because its billing terms include the provision that the goods are shipped FOB point of shipment which is standard practice in the Company’s industry.

Bad Debt

The Company maintained an allowance for doubtful accounts of $1,300 at March 31, 2012 and $2,000 at December 31, 2011.  Management deems the amount of the allowance to be adequate.

Stockholders’ Equity

 On October 30, 2009 (the “CML Closing Date”), the Company completed the transactions contemplated by a Stock Purchase Agreement (the “CML Stock Purchase Agreement”) entered into on October 8, 2009 among the Company, Central Mega Limited, a British Virgin Islands corporation (“CML”), and the Company’s chief executive officer, pursuant to which, among other things, CML purchased on the Closing Date an aggregate of 13,000,000 shares of common stock of the Company at a purchase price of $0.04 per share, consisting of 11,000,000 authorized but previously unissued shares of common stock of the Company for an aggregate purchase price of $440,000 which was paid to the Company on the Closing Date, and 2,000,000 previously issued shares of common stock owned by the chief executive officer for an aggregate purchase price of $80,000 which was paid to the executive officer on the Closing Date (the “CML Stock Purchase”).

In order to enhance the Company’s cash position, the Company’s chief executive officer made an equity investment of $50,000 during the month of March 2011 in exchange for 1,000,000 shares of common stock of the Company.

On April 8, 2011, the Company received a conversion notice from its chief executive officer to convert the entire principal amount owing under a convertible promissory note held by such officer in the principal amount of $225,000 dated as of May 1, 2009, as amended on October 30, 2009 and June 7, 2010. In accordance with the terms of the promissory note, it was converted into 2,500,000 shares of common stock of the Company to fully satisfy the principal amount owing thereunder.  

On June 24, 2011, the Company agreed to issue 304,612 restricted shares of Common Stock for prior legal services in the amount of $12,184.50.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments when available.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

8

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

Major Customers

For the three months ended March 31, 2012, approximately 44.2% of total sales were to the Company’s 3 largest customers.

Basic Earnings per Common share

Basic earnings per share (“EPS”) are computed based on the weighted average number of common shares outstanding for the period.  Diluted EPS gives effect to all dilutive potential shares outstanding (i.e. options and warrants) during the period.

Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  There were no deferred taxes for the period ending March 31, 2012 and December 31, 2011. See NOTE 4.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, - Improving Disclosures about Fair Value Measurements (ASU 2010-06) (codified within ASC 820 - Fair Value Measurements and Disclosures). ASU 2010-06 improves disclosures originally required under SFAS No. 157. ASU 2010-16 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The Company is in compliance with the additional disclosure required by this guidance.

In December 2009, the FASB issued ASU 2009-16, - Transfers and Servicing (Topic 860) – Accounting for Transfers of Financial Assets. ASU 2009-16 amends the accounting for transfers of financials assets and will require more information about transfers of financial assets, including securitizations, and where entities have continuing exposure to the risks related to transferred financial assets. ASU 2009-16 is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, with early adoption not permitted. The Company is in compliance with the additional disclosure required by this guidance.

In October 2009, the FASB issued ASU 2009-15, - Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. ASU 2009-15 amends the accounting and reporting guidance for debt (and certain preferred stock) with specific conversion features or other options. ASU 2009-15 is effective for fiscal years beginning on or after December 15, 2009. The Company is currently assessing the impact of ASU 2009-13 on its consolidated financial position, results of operations and cash flows.

In October 2009, the FASB issued ASU No. 2009-13, - Multiple Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force (ASU 2009-13) (codified within ASC Topic 605). ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently assessing the impact of ASU 2009-13 on its consolidated financial position, results of operations and cash flows.

9

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

Recently Issued Accounting Pronouncements (continued)

In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05, - Measuring Liabilities at Fair Value (ASU 2009-05) (codified within ASC 820 - Fair Value Measurements and Disclosures). ASU 2009-05 amends the fair value and measurement topic to provide guidance on the fair value measurement of liabilities. ASU 2009-05 is effective for interim and annual periods beginning after August 26, 2009. The Company adopted this guidance effective October 1, 2009.

In June 2009, the FASB issued SFAS No. 168, - The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 (SFAS 168) (codified within ASC 105 - Generally Accepted Accounting Principles). SFAS 168 stipulates that the FASB Accounting Standards Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. In conjunction with the issuance of SFAS 168, the SEC issued interpretive guidance Final Rule 80 (FR-80) regarding FASB’s Accounting Standards Codification. Under FR-80, the SEC clarified that the ASC is not the authoritative source for SEC guidance and that the ASC does not supersede any SEC rules or regulations. Further, any references within the SEC rules and staff guidance to specific standards under U.S. GAAP should be understood to mean the corresponding reference in the ASC. FR-80 is also effective for interim and annual periods ending after September 15, 2009. The adoption had no impact on the Company’s financial position, cash flows or results of operations.

In June 2009, the FASB issued SFAS No. 166, - Accounting for Transfers of Financial Assets (SFAS 166) (codified within ASC 860 - Transfers and Servicing). SFAS 166 amends the derecognition guidance in SFAS No. 140, - Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 140). SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company is in compliance with the additional disclosure required by this guidance.

In May 2009, the FASB issued SFAS No. 165, - Subsequent Events (SFAS 165) (codified within ASC 855 - Subsequent Events). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. Specifically, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective prospectively for interim and annual periods ending after June 15, 2009. The Company adopted this guidance on June 30, 2009.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, - Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1) (codified within ASC 825 - Financial Instruments). FSP FAS 107-1 and APB 28-1 require fair value disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of current market conditions on financial instruments. FSP FAS 107-1 and APB 28-1 are effective for interim and annual periods ending after June 15, 2009. The Company adopted this guidance on June 30, 2009.

In April 2009, the FASB issued FSP FAS 157-4 - Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly (codified within ASC 820). FSP FAS 157-4 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. It also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 becomes effective for interim and annual reporting periods after June 15, 2009 and shall be applied prospectively. The adoption of this guidance did not have a significant effect on the Company’s financial statements.

10

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

Recently Issued Accounting Pronouncements (continued)

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, - Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2) (codified within ASC 320. Investments – Debt and Equity Securities). FSP FAS 115-2 and FAS 124-2 change the method for determining whether an other-than-temporary impairment exists for debt securities and the amount of the impairment to be recorded in earnings. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual periods ending after June 15, 2009. The adoption of this guidance did not have a significant effect on the Company's financial statements.

In June 2008, the FASB issued EITF 07-05 Determining Whether an Instrument (or Embedded Feature) is Indexed to a Company's Own Stock, (codified within ASC 815 - Derivatives and Hedging - Contracts in Entity’s Own Equity), the FASB ratified the consensus reached on determining whether an instrument (or embedded feature) is indexed to an entity's own stock. This consensus clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as a scope exception under the standard accounting for derivative instruments and hedging activities. This consensus is effective for financial statements issued for fiscal years beginning after December 15, 2008. It was effective for the Company on January 1, 2009. The adoption of this consensus did not have a significant effect on the Company's financial statements.

In March 2008, the FASB issued SFAS No. 161, - Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133, (SFAS 161) (codified within ASC 815 - Derivatives and Hedging). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity‘s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Company adopted this guidance on January 1, 2009. The Company currently does not have any derivative financial instruments subject to accounting or disclosure under this standard; therefore, the adoption of this standard did not have a significant effect on the Company's statement of financial position, results of operations or cash flows.

In February 2010, the FASB amended its guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events, for both issued and revised financial statements. This amendment alleviates potential conflicts between the FASB’s guidance and the reporting rules of the SEC. Our adoption of this amended guidance, which was effective upon issuance, had no effect on our financial condition, results of operations, or cash flows.  There were no subsequent events that would require adjustment to or disclosure in the financial statements.

NOTE 2 – TRADE ACCOUNTS RECEIVABLE:

Trade accounts receivable were as follows:

	March 31,	December 31,
	2012	2011
Trade accounts receivable	$          25,700	$        40,600
Less: allowance for doubtful accounts	1,300	2,000
	$          24,400	$        38,600

Bad debt was decreased $700 for three month period ended March 31, 2012 and $3,900 for the year ended December 31, 2011.  

11

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 3 – PROPERTY, PLANT AND EQUIPMENT:

Property, Plant and Equipment consisted of the following:

	March 31,	December 31,
	2012	2011
Building Improvements	$                  14,100	$                 14,100
Equipment	1,198,400	1,198,400
Furniture and Fixtures	233,300	233,300
	1,445,800	1,445,800
Less: accumulated depreciation	(1,431,500)	(1,431,000)
	$                 14,300	$                14,800

Depreciation expense for the three month period ended March 31, 2012 was $500 and for the year ended December 31, 2011 was $2,400.

NOTE 4 – TAXES AND NET OPERATING LOSS CARRY FORWARDS:

The Federal Net Operating Loss Carry Forwards are as follows:

Year	Amount	Year of Expiration
2002	$  460,401	2017
2003	258,213	2018
2004	35,802	2019
2006	48,524	2021
2008	710	2023
2009	268,866	2024
2010	409,269	2025
2011	387,041	2026
	$1,868,826

The New York State Net Operating Loss Carry Forwards are as follows:

Year	Amount	Year of Expiration
2002	$    432,797	2017
2003	257,316	2018
2004	34,380	2019
2006	48,524	2021
2009	265,691	2024
2010	404,472	2025
2011	387,268	2026
	$1,830,448

As of March 31, 2012 and December 31, 2011, the components of deferred tax assets were as follows:

	March 31,	December 31,
	2011	2011
Accounts receivable allowance	$               700	$              700
Net operating loss-carry-forward	387,000	327,500
Total gross deferred tax assets
(at 34% statutory rate)	387,700	328,200
Less: Valuation allowance	(387,700)	(328,200)
Net deferred tax assets	$                   0	$                  0

12

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 4 – TAXES AND NET OPERATING LOSS CARRY FORWARDS: (continued)

Under current accounting guidelines, NOLs represent temporary differences that enter into the calculation of deferred tax assets.  Realization of deferred tax assets associated with the NOL is dependent upon generating sufficient taxable income prior to their expiration.

Management believes that there is a risk that certain of these NOLs may expire unused and, accordingly, has established a valuation allowance against them.  Although realization is not assured for the remaining deferred tax assets, based on the historical trend in Company sales and profitability, sales backlog, and budgeted sales management believes it is likely that they may not be totally realized through future taxable earnings.  In addition, the net deferred tax assets could be reduced in the near term if management’s estimates of taxable income during the carry forward period are significantly reduced.

The Company believes it is possible that the benefit of these additional assets may not be realized in the future.

NOTE 5 – COMMITMENTS AND CONTINGENIES:

On July 27, 2005, the Company entered into a lease agreement with 65 Rushmore Realty, LLC. The lease agreement is a triple net lease and is for a period of seven years with a base annual rent of $83,286 to be paid in monthly installments of $6,940.50.  This annual rent is subject to annual increases based on the Consumer Price Index for All Urban Consumers of the United States Department of Labor Bureau of Labor Statistics in effect for New York and Northern New Jersey starting August 1, 2009.  The Company has the right to terminate the lease prior to the expiration upon 120 days notice to the landlord.

In connection with the CML Stock Purchase, on October 30, 2009 (see Note 1-Stockholders’ Equity), the chief executive officer, CML and the Company entered into a Put Option Agreement (the “Put Agreement”) pursuant to which the chief executive officer has been granted a put option (the “Put Option”) to be exercised at the sole option of the chief executive officer at the end of the initial  two year term of the Employment Agreement described below (or an earlier termination pursuant to the certain other terms of the Employment Agreement), to sell to CML a maximum of 1,000,000 previously issued shares of the common stock of the Company (the “Put Shares”) at a price equal to the then current market price multiplied by .80, with a minimum purchase price per share of $0.30 and a maximum purchase price per share of $0.80, provided that in the event CML does not comply with the terms and conditions of the Put Agreement, the Company shall be required to purchase the Put Shares at the same price applicable to the Put Option.

On October 30, 2009, the Company and the chief executive officer entered into a First Amendment to Convertible Promissory Note (the “First Note Amendment”) which amended a certain convertible promissory note (the “Original Note”) payable to the chief executive officer dated as of May 1, 2009 in the principal amount of $225,000 which is due and payable in three years with 5% annual interest payable quarterly.  Pursuant to the First Note Amendment, the Company and the chief executive officer agreed that the unpaid balance shall cease to accrue interest commencing as of the Closing Date of the CML Stock Purchase Agreement.  In addition, the Company and the chief executive officer agreed that the conversion price in which the principal amount may be converted into shares of common stock shall be $0.09 per share until the first anniversary of the Closing Date.  Thereafter, as in the Original Note, the conversion price shall be $0.14 per share if converted on or before April 30, 2011, and $0.19 per share if converted between May 1, 2011 and April 30, 2012.

On June 7, 2010, the Company and the chief executive officer entered into a Second Amendment to Convertible Promissory Note which amended the conversion privileges contained in the Original Note, as amended by the First Note Amendment, to provide that the conversion price shall be $.09 per share until April 30, 2011.  Thereafter, as in the Original Note and First Note Amendment, the conversion price shall be $.19 per share if converted between May 1, 2011 and April 30, 2012.  See NOTE 1 – Stockholders’ Equity for information on the conversion of the promissory note.

13

DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE 5 – COMMITMENTS AND CONTINGENIES: (continued)

On October 30, 2009, the Company entered into an employment agreement (the “Employment Agreement”) with the chief executive officer pursuant to which the chief executive officer will continue to serve as Chief Executive Officer and President of the Company.  The term of the Employment Agreement shall be two years from the Closing Date, provided that the term may be extended upon the written agreement of the chief executive officer and the Company.  The chief executive officer will receive an annual base salary of $93,600 subject to annual review for possible increase, and will receive other benefits.  The Employment Agreement expired as of October 30, 2011.

NOTE  6 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY

Accounting Standards Codification

 In June 2009, the FASB issued authoritative guidance which replaced the previous hierarchy of U.S. GAAP and establishes the FASB Codification as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities.  SEC rules and interpretive releases are also sources of authoritative U.S. GAAP for SEC registrants. This guidance modifies the U.S. GAAP hierarchy to include only two levels of U.S. GAAP: authoritative and no authoritative.  This guidance was effective for the Company as of December 31, 2009.  The adoption of this guidance did not impact the Company’s results of operations, cash flows or financial positions since the FASB Codification is not intended to change or alter existing U.S. GAAP.

Subsequent Events

In February 2010, the FASB amended its guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events, for both issued and revised financial statements. This amendment alleviates potential conflicts between the FASB’s guidance and the reporting rules of the SEC. Our adoption of this amended guidance, which was effective upon issuance, had no effect on our financial condition, results of operations, or cash flows.  There were no subsequent events that would require adjustment to or disclosure in the financial statements.

NOTE  7 – STOCK PLAN:

On June 10, 2010, the Board of Directors approved and adopted the Dionics, Inc. 2010 Consultant Stock Compensation Plan (the “2010 Plan”) and authorized the Company to issue up to 4,000,000 shares of Common Stock under the 2010 Plan.  The 2010 Plan is intended to promote the interests of the Company by offering those outside consultants or advisors of the Company who assist in the development and success of the business of the Company the opportunity to participate in a compensation plan designed to reward them for their services and to encourage them to continue to provide services to the Company.  The Company has filed a Registration Statement on Form S-8 with the Securities and Exchange Commission in order to register the shares of Common Stock of the Company issuable pursuant to the 2010 Plan.

On August 16, 2010, the Company issued 900,000 shares to an individual which shares were issued under the 2010 Plan and pursuant to a consulting agreement entered into in July 2010.

NOTE  8 – SECURED DEMAND PROMISSORY NOTES:

Between July 11, 2011 and December 1, 2011, the Company’s chief executive officer made a series of loans to the Company in the aggregate principal amount of $104,131. Such loans are due on demand, accrue interest at 6% per annum and are secured by all the assets of the Company.

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DIONICS, INC.

Notes to the Financial Statements

March 31, 2012

(Unaudited)

NOTE  9 – SHARE EXCHANGE AGREEMENT AND INVESTOR LOAN:

On January 30, 2012, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with Shangrao Bai Hua Zhou Industrial Co., Ltd., a company incorporated in the People’s Republic of China (“Shangrao”), and the sole shareholder of Shangrao (the “Shangrao Shareholder”).  Pursuant to the Exchange Agreement, at closing the Company will acquire 100% of the issued and outstanding shares of Shangrao from the Shangrao Shareholder in exchange for the issuance of  shares of common stock and convertible preferred stock so that the Shangrao Shareholder will upon conversion of the preferred stock hold 95.0% of the total shares of common stock of the Company to be outstanding upon closing of the Exchange Agreement.  In accordance with the Exchange Agreement, Shangrao has loaned the Company the sum of $200,000 (the “$200,000 Loan”) pursuant to a Non-Recourse Promissory Note which will be due one year from January 30, 2012.    

The Exchange Agreement also provides that the Company shall transfer and assign to an entity (the “Acquisition Entity”) created by Bernard Kravitz, the Company’s President, all of the current assets of the Company and the Acquisition Entity shall assume all of the liabilities of the Company, including but not limited to the $200,000 Loan.  In addition, prior to the closing, the Exchange Agreement provides that Bernard Kravitz shall convert his demand notes owing from the Company into 2,000,000 shares of the common stock of the Company and agree to terminate the Put Agreement entered into on October 30, 2009 which has a minimum value of $300,000 and release the Company from any obligations thereunder.    

Shangrao’s recovery against the Company or the Acquisition Entity, as the case may be, for failure to pay any amount owing under the $200,000 Loan shall be limited solely to up to 2,000,000 shares reserved by the Company, until the $200,000 Loan is assumed by the Acquisition Entity at which time Bernard Kravitz will pledge up to 2,000,000 of his own shares in place thereof.  The Company and the Acquisition Entity shall not be liable or have any personal liability in any other respect for the payment of any amount due under the $200,000 Loan.

In the event the Exchange Agreement is terminated by the Company due to the failure of Shangrao or the Shangrao Shareholder to comply in any material respect with any of the covenants, conditions, terms or agreements contained in the Share Exchange Agreement to be complied with or performed by it, which breach is not cured within ten days if capable of cure; or any representations and warranties of the Company or the Shangrao Shareholders shall have been materially false when made, then, and in such event only, the Company shall have no further liability under the Loan and it shall be deemed canceled.      

The closing, which is to occur within 90 days of the date of the Exchange Agreement, is subject to a number of conditions including but not limited to the delivery by Shangrao of two-year audited and other financial statements of Shangrao, the accuracy at closing of the representations made by the parties in the Exchange Agreement, and the performance and compliance by the parties with each covenant and condition contained in the Exchange Agreement.  

NOTE  10 – SUBSEQUENT EVENTS

See NOTE 9 for information on the Share Exchange Agreement entered into with Shangrao Bai Hua Zhou Industrial Co., Ltd. (“Shangrao”), and the sole shareholder of Shangrao.  On May 3, 2012, the parties agreed to extend the closing or the closing date of the Share Exchange Agreement to on or before June 30, 2012.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with the financial statements of the Company included elsewhere herein.

Forward-Looking Statements

This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs and assumptions made by the Company’s management as well as information currently available to the management.  When used in this document, the words “anticipate”, “believe”, “estimate”, and “expect” and similar expressions, are intended to identify forward-looking statements.  Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected.  

Liquidity and Capital Resources

The Company’s primary source of funds is cash flow from operations in the normal course of business. On March 31, 2012 the Company had Working Capital of $26,800 and Stockholders’ Deficit of $137,800.  This compares to Working Capital of negative $64,800 and Stockholder’s Deficit of $28,900 on December 31, 2011. Total Assets were $277,400 and Total Liabilities were $415,200 at March 31, 2012 (including a $104,000 Demand Note due the Company’s CEO and a $200,000 Loan from Shangrao Bai Hua Zhou Industrial Co., Ltd. (“Shangrao”)) as compared to Total Assets of $210,400 and Total Liabilities of $239,300 at December 31, 2011.  Such $200,000 Loan was provided by Shangrao in connection with the Share Exchange Agreement entered into with Shangrao on January 30, 2012.  

Net cash used in operating activities in the 3-months ended March 31, 2012 was $124,700, which was primarily the result of a net loss of $108,900, plus an increase in inventory of $9,400 and a decrease in accounts payable of $33,900, offset by a decrease in accounts receivable of $14,900 and an increase in accrued expenses of $9,800.  This compares to net cash used in operating activities in the 3-months ended March 31, 2011 of $72,300, which was the result primarily of a net loss of $127,200 offset by a decrease in accounts receivable of $32,600 and an increase in accounts payable of $18,700, plus the net result of changes in several other smaller items.

Net cash provided by financing activities was $200,000 for the 3-months ended March 31, 2012 which was due to the $200,000 Loan made by Shangrao during the first quarter of 2012 compared to net cash provided by financing activities for the 3-months ended March 31, 2011 of $50,000 which was due to an emergency equity investment of $50,000 made by the Company’s CEO in March 2011.

There was no net cash provided by or used for investing activities for the three months ended March 31, 2012 and three months ended March 31, 2011.  

Results of Operations

For the last several years, the Company has been struggling against the lingering effects of a national recession, particularly evident in the primary market segment served by Dionics, Inc.  Perhaps showing a “bottoming out” pattern, the 2012 First Quarter financial results are very close to those of the same period last year.

Sales in the First Quarter of 2012 were $107,400 as compared to $116,000 in the First Quarter of 2011.  Cost of Sales in the current period was $123,000 as compared to $128,500 in the First Quarter of 2011. As a result both of fixed costs which could not be reduced on lower sales volume, plus ongoing expenses in our cost-reduction program for our PV MOSFET-Driver product-line, the above results produced a Gross Loss of $15,600 in the current period and $12,500 in the same period last year.

The one area where some cost reduction was evident was in Selling, General and Administrative Expenses.  SG&A Expenses dropped to $93,400 in the First Quarter of 2012 as compared to $114,700 in the same period of 2011, the earlier period being affected unfavorably by erratic timing in the billing for certain professional fees.

With the benefit of the lower SG&A Expense, the First Quarter of 2012 showed a reduced Net Loss of $108,900 versus a Net Loss of $127,200 in the First Quarter of 2011.

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Based on the terms of our recently signed Share Exchange Agreement entered into with Shangrao,   the Closing of which is scheduled to occur on or before June 30, 2012, we will transfer all Assets and Liabilities of the current operations, including the $200,000 debt described above made by Shangrao, to what will be a newly created, privately-owned entity.  It is intended that our current operations will be moved to a new but smaller manufacturing facility and will be making other adjustments in our business model in an effort to stabilize financial results.  Such transfer of the Assets and Liabilities of the current operations is contemplated to be made as part of the transactions to be consummated pursuant to the Share Exchange Agreement in which we will at closing acquire control of the business and operations of Shangrao.  

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

Significant Accounting Policies

Our discussion and analysis of the Company’s financial condition and results of operations are based upon our consolidated financial statements which have been prepared in conformity with U.S. generally accepted accounting principles.  Our significant accounting policies are described in Note 1 to the financial statements included elsewhere herein.  The application of our critical accounting policies is particularly important to the portrayal of our financial position and results of operations.  These critical accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

Accounts Receivable - Accounts for which no payments have been received for three consecutive months are considered delinquent and a reserve is setup for them.  Customary collection efforts are initiated and an allowance for uncollectible accounts is set up and the related expense is charged to operations.

Inventories - 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.  Finished goods and work-in-process inventories include material and labor.  

Long-Lived Assets- Property, Plant and Equipment - These assets are recorded at cost less depreciation and amortization. Depreciation and amortization are accounted for on the straight-line method based on estimated useful lives.  The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterments and large renewals, which extend the life of the asset, are capitalized whereas maintenance, repairs and small renewals are expenses, as incurred.  The estimated useful lives are: machinery and equipment, 7-15 years; buildings, 30 years; and leasehold improvements, 10-20 years.

Revenue - The Company recognizes revenue upon completion and shipment of goods because its billing terms include the provision that the goods are shipped FOB point of shipment which is standard practice in the Company’s industry.

Income Taxes - Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Recently Issued Accounting Pronouncements Affecting the Company

Please refer to the notes to our financial statements included elsewhere in this report for information concerning recent accounting pronouncements.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4.  Controls and Procedures.

Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation, our Principal Executive Officer and Principal Financial Officer has concluded that, as of March 31, 2012, these disclosure controls and procedures were effective to ensure that all information required to  be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.   

There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 PART II - OTHER INFORMATION

Item 1.  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 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

None.

Item 6.  Exhibits.

(a) Exhibits.

31.1      Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)

31.2      Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)

32.1      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

101*

The following financial information from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) Notes to Financial Statements

_____________________

*

In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

DIONICS, INC.

    (Registrant)

Dated:  May 14, 2012	By:  /s/ Bernard L. Kravitz
	Bernard L. Kravitz, President
Dated:  May 14, 2012	By:  /s/ Bernard L. Kravitz
	Bernard L. Kravitz, Principal Financial Officer

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