UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended JuneSeptember 30, 2015

 

OR

 

[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

COMMISSION FILE NO. 0-17629

 

ADM TRONICS UNLIMITED, INC.
(Exact name of registrant as specified in its charter)

 

 Delaware

(State or Other Jurisdiction

of Incorporation or organization)

 

22-1896032

(I.R.S. Employer

Identification Number)

 

224-S Pegasus Ave., Northvale, New Jersey 07647
(Address of Principal Executive Offices)

 

Registrant's Telephone Number, including area code: (201) 767-6040

 

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 Large accelerated filer [  ] 

Accelerated filer  [  ]

 

 

 Non-accelerated filer [  ] (Do not check if a smaller reporting company)

Smaller reporting company [X]

                                                            

Indicate by check mark whether the registrant is a shell company (as defined in 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:

 

67,008,502 shares of Common Stock, $.0005 par value, as of August 14,November 20, 2015.

 

 
 

 

 

ADM TRONICS UNLIMITED, INC., AND SUBSIDIARY 

 

INDEX

 

 

 

Page

 

 

Number

Part I - Financial Information

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements:

 

 

 

 

 

Condensed Consolidated Balance Sheets – JuneSeptember 30, 2015 (unaudited) and March 31, 2015

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended JuneSeptember 30, 2015 and 2014 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Cash Flow for the threesix months ended JuneSeptember 30, 2015 and 2014 (unaudited)

5

 

 

 

 

Notes to the Condensed Consolidated Financial Statements (unaudited)

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

1416

 

 

 

Item 4.

Controls and Procedures

1416

 

 

 

Part II - Other Information

 

 

 

 

Item 1.

Legal Proceedings

1517

 

 

 

Item 1A.

Risk Factors

1517

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

1517

 

 

 

Item 3.

Defaults Upon Senior Securities

1517

 

 

 

Item 4.

Mine Safety Disclosures

1517

 

 

 

Item 5.

Other Information

1517

Item 6.

Exhibits

1518

 

 
 

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

ADM TRONICSUNLIMITED, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

June 30,

  

March 31,

  

September 30,

  

March 31,

 
 

2015

  

2015

  

2015

  

2015

 
 

(Unaudited)

      

(unaudited)

     

ASSETS

                
                

Current assets:

                

Cash and cash equivalents

 $370,526  $216,395  $942,143  $216,395 

Accounts receivable, net of allowance for doubtfulaccounts of $25,000 for each period

  750,803   616,070   800,813   616,070 

Inventories

  166,792   137,704   193,749   137,704 

Prepaid expenses and other current assets

  29,414   16,595   21,595   16,595 

Restricted cash

  232,786   232,525   232,874   232,525 

Deferred tax asset

  410,000   - 
                

Total current assets

  1,550,321   1,219,289   2,601,174   1,219,289 
                

Property and equipment, net of accumulated depreciationof $74,522 and $74,070, respectively

  2,794   3,246 

Property and equipment, net of accumulated depreciationof $74,972 and $74,070, respectively

  2,344   3,246 
                

Inventories - long-term portion

  84,904   88,257   74,639   88,257 

Intangible assets, net of accumulated amortizationof $154,015 and $153,667, respectively

  14,133   14,481 

Intangible assets, net of accumulated amortizationof $154,365 and $153,667, respectively

  13,784   14,481 

Other assets

  16,144   16,144   16,144   16,144 

Deferred tax asset

  447,000   - 

Total other assets

  117,975   122,128   553,911   122,128 
                

Total assets

 $1,668,296  $1,341,417  $3,155,085  $1,341,417 
                

LIABILITIES AND STOCKHOLDERS' EQUITY

                
                

Current liabilities:

                

Note payable - bank

 $114,966  $121,966  $108,966  $121,966 

Accounts payable

  173,216   329,291   238,754   329,291 

Accrued expenses and other current liabilities

  266,840   221,106   271,128   221,106 

Customer deposits

  99,102   99,102   99,102   99,102 

Due to shareholder

  233,841   223,849   249,606   223,849 

Total current liabilities

  887,965   995,314   967,556   995,314 
                

Total liabilities

  887,965   995,314   967,556   995,314 
                

Stockholders' equity:

                

Preferred stock, $.01 par value; 5,000,000 shares authorized,no shares issued and outstanding

  -   -   -   - 

Common stock, $0.0005 par value; 150,000,000 authorized, 64,939,537 shares issued and outstanding at March 31, 2015 and 2014, respectively

  32,470   32,470 

Common stock, $0.0005 par value; 150,000,000 authorized, 67,008,502 and 64,939,537 shares issued and outstanding at September 30, 2015 and March 31, 2015, respectively

  33,504   32,470 

Additional paid-in capital

  32,298,094   32,298,094   33,195,759   32,298,094 

Accumulated deficit

  (31,550,233)  (31,984,461)  (31,041,734)  (31,984,461)

Total stockholders' equity

  780,331   346,103   2,187,529   346,103 
                

Total liabilities and stockholders' equity

 $1,668,296  $1,341,417  $3,155,085  $1,341,417 

 

The accompanying notes are an integral part of these

condensed consolidated financial statements.

 

 

 

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014

(Unaudited)

 

  

2015

  

2014

 
         

Net revenues

 $1,055,928  $623,674 
         

Cost of sales

  300,873   338,216 
         

Gross Profit

  755,055   285,458 
         

Operating expenses:

        

Research and development

  24,689   12,045 

Selling, general, and administrative

  295,221   236,037 

Depreciation and amortization

  597   1,642 
         

Total operating expenses

  320,507   249,724 
         

Income from operations

  434,548   35,734 
         

Other income (expense):

        

Interest income

  321   1,047 

Interest expense

  (641)  (953)

Total other income (expense)

  (320)  94 
         
         

Net income

 $434,228  $35,828 
         

Basic and diluted net income per common share:

 $0.01  $0.00 
         

Weighted average shares of common stock outstanding - basic

  64,939,537   64,939,537 
         

Weighted average shares of common stock outstanding - diluted

  65,539,537   65,539,537 

  

Three months ended

  

Six months ended

 
  

September 30,

  

September 30,

 
  

2015

  

2014

  

2015

  

2014

 
                 

Net revenues

 $1,252,881  $748,593  $2,308,809  $1,372,267 
                 

Cost of sales

  495,680   263,869   796,553   602,085 
                 

Gross Profit

  757,201   484,724   1,512,256   770,182 
                 

Operating expenses:

                

Research and development

  30,522   18,241   55,211   30,286 

Selling, general and administrative

  475,186   337,142   770,411   573,697 

Stock based compensation

  598,699   -   598,699   - 

Depreciation and amortization

  709   555   1,306   1,680 
                 

Total operating expenses

  1,105,116   355,938   1,425,627   605,663 
                 

Income (loss) from operations

  (347,915)  128,786   86,629   164,519 
                 

Other income (expense):

                

Interest income

  248   1,325   569   2,372 

Interest expense

  (830)  (740)  (1,471)  (1,693)

Total other income (expense)

  (582)  585   (902)  679 
                 

Income (loss) before benefit for income taxes

  (348,497)  129,371   85,727   165,198 

Benefit for income taxes - deferred

  857,000   -   857,000   - 
                 

Net income

 $508,503  $129,371  $942,727  $165,198 
                 

Basic and diluted per common share:

 $0.01  $0.00  $0.01  $0.00 
                 

Weighted average shares of common stock outstanding - basic

  66,176,418   64,939,537   65,561,357   64,939,537 
                 

Weighted average shares of common stock outstanding - diluted

  66,994,600   65,539,537   66,379,539   65,539,537 

 

The accompanying notes are an integral part of these

condensed consolidated financial statements.

 

 

 

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREESIX MONTHS ENDED JUNESEPTEMBER 30, 2015 AND 2014

(Unaudited)

 

 

2015

  

2014

  

2015

  

2014

 

Cash flows from operating activities:

                

Net income

 $434,228  $35,828 

Adjustments to reconcile net income to netcash provided (used) in operating activities:

        

Net income (loss)

 $942,727  $165,198 

Adjustments to reconcile net loss to netcash used in operating activities:

        

Stock based compensation

  598,699   - 

Depreciation and amortization

  800   1,642   1,600   3,054 

Interest receivable

  -   (1,047)  -   (2,106)

Deferred income tax

  (857,000)  - 

Increase (decrease) in cash flows as a result of changes innet assets and liabilities balances:

                

Accounts receivable

  (134,733)  (111,136)  (184,743)  (164,620)

Inventory

  (25,736)  (82,996)

Inventories

  (42,427)  (183,704)

Prepaid expenses and other current assets

  (12,818)  (23,838)  (5,000)  (5,819)

Other assets

  -   (1,000)

Accounts payable

  (156,075)  47,442   (90,538)  51,282 

Customer deposit

  -   103,492 

Accrued expenses and other current liabilities

  45,734   125,843   50,022   60,369 

Due to shareholder

  9,992   -   25,757   57,894 

Total adjustments

  (272,836)  (45,090)  (503,630)  (80,158)

Net cash provided (used) in operating activities

  161,392   (9,262)

Net cash provided by operating activities

  439,097   85,040 
                

Cash flows from investing activities:

                

Investment in Angiodroid

  -   (1,000)

Restricted cash

  (261)  -   (349)  (261)

Net cash used in investing activities

  (261)  - 

Net cash used by investing activities

  (349)  (1,261)
                

Cash flows used in financing activities:

        

Cash flows provided (used) in financing activities:

        

Repayments on note payable - Bank

  (7,000)  (4,000)  (13,000)  (7,000)

Sale of common stock

  300,000   - 
                

Net cash used in financing activities

  (7,000)  (4,000)
                

Net increase (decrease) in cash and cash equivalents

  154,131   (13,262)

Net cash provided by (used) in financing activities

  287,000   (7,000)
        

Net increase (decrease) in cash

  725,748   76,779 
                

Cash and cash equivalents - beginning of year

  216,395   83,156   216,395   83,156 
                

Cash and cash equivalents - end of year

 $370,526  $69,894  $942,143  $159,935 
                
Supplementary Disclosures of Cash Flow Information        
        

Cash paid for:

                

Interest

 $641  $953  $1,471  $1,693 

 

The accompanying notes are an integral part of these

condensed consolidated financial statements.

 

 

 

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNESEPTEMBER 30, 2015 AND 20142014

 

 

NOTE 1 - NATURE OF BUSINESS

 

ADM Tronics Unlimited, Inc. ("we", "us", the “Company" or "ADM"), was incorporated under the laws of the state of Delaware on November 24, 1969. We are an engineering and manufacturing concern whose principal lines of business are engineering and manufacturing of electronics, primarily medical electronic devices, and the development, production and sale of chemical products.

 

The accompanying condensed consolidated financial statements as of JuneSeptember 30, 2015 (unaudited) and March 31, 2015 and for the three and six month periods ended JuneSeptember 30, 2015 and 2014 (unaudited) have been prepared by ADM pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the condensed financial position and operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements and the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the audited financial statements and explanatory notes for the year ended March 31, 2015 as disclosed in our annual report on Form 10-K for that year . The operating results and cash flows for three and six months ended JuneSeptember 30, 2015 (unaudited) are not necessarily indicative of the results to be expected for the pending full year ending March 31, 2016.

    

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF CONSOLIDATION

 

The condensed consolidated financial statements include the accounts of ADM Tronics Unlimited, Inc. and its subsidiary Sonotron. All significant intercompany balances and transactions have been eliminated in consolidation.

 

USE OF ESTIMATES

 

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. Significant estimates made by management include expected economic life and value of our medical devices, reserves, deferred tax assets, valuation allowance, impairment of long lived assets, fair value of equity instruments issued to consultants for services and fair value of equity instruments issued to others, option and warrant expenses related to compensation to employees and directors, consultants and investment banks, allowance for doubtful accounts, and warranty reserves. Actual results could differ from those estimates. 

  

REVENUE RECOGNITION

 

CHEMICAL PRODUCTS:

 

 Revenues are recognized when products are shipped to end users. Shipments to distributors are recognized as revenue when no right of return exists.

 

 

 

ELECTRONICS: 

 

We recognize revenue from the sale of our electronic products when they are shipped to the purchaser. We offer a limited 90 day warranty on our electronics products and a limited 5 year warranty on our electronic controllers for spas and hot tubs. We have no other post shipment obligations. Based on prior experience, no amounts have been accrued for potential warranty costs and actual costs were less than $2,000, for each of the fiscal years ended March 31, 2015 and 2014. For contract manufacturing, revenues are recognized after shipment of the completed products. 

 

ENGINEERING SERVICES: 

 

We provide certain engineering services, including research, development, quality control and quality assurance services along with regulatory compliance services. We recognize revenue from engineering services as the services are provided. 

 

NET INCOME PER SHARE

 

Basic net income per share is calculated based on the weighted average number of common shares outstanding during the periods. Diluted net income per share is computed similar to basic income per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential shares had been issued and if the additional shares were dilutive.

  

Per share basic and diluted net income amounted to $0.01 for both the three and six months ended September 30, 2015 and $0.00 for both the three and six months ended JuneSeptember 30, 2015 and 2014, respectively.2014. There were 3,600,000 and 600,000 common stock equivalents at JuneSeptember 30, 2015 and 2014, respectively.

 

RECLASSIFICATION

 

Certain items in the prior financial statements have been reclassified to conform to the current period presentation.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Management does not believe that any recently issued, but not yet effective accounting pronouncement, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

  

NOTE 3 - INVENTORIES

 

Inventories at JuneSeptember 30, 2015 consisted of the following:

 

  

Current

  

Long Term

  

Total

  

Current

  

Long Term

  

Total

 
Raw materialsRaw materials $139,584  $84,285  $223,869  $170,822  $74,113  $244,935 
Finished GoodsFinished Goods  27,208   619   27,827   22,927   526   23,453 
  $166,792  $84,904  $251,696  $193,749  $74,639  $268,388 

 

Inventories at March 31, 2015 consisted of the following:

 

  

Current

  

Long Term

  

Total

 

Raw materials

 $95,702  $87,638  $183,340 

Finished Goods

  42,002   619   42,621 
  $137,704  $88,257  $225,961 

 

 

 

The Company values its inventories onat the first in, first out ("FIFO") method at the lower of cost or market.

 

NOTE 4 – CONCENTRATIONS

 

During the three month period ended JuneSeptember 30, 2015, one customer accounted for 46%42% of our revenue and approximately 48% of our accounts receivable as of June 30, 2015.

revenue.

During the three month period ended JuneSeptember 30, 2014, one customer accounted for 18% of our revenue.

During the six month period ended September 30, 2015, one customer accounted for 42% of our revenue. As of September 30, 2015, one customer represented approximately 50% of our accounts receivable.

During the six month period ended September 30, 2014, one customer accounted for 18% of our revenue. As of JuneSeptember 30, 2014, three customers represented approximately 52%42% of our accounts receivable.

 

The Company’s customer base is comprised of domesticforeign and foreigndomestic entities with diverse demographics. Revenues from foreign customers represented $101,313$98,411 of net revenue or 9.6%7.9% for the three months ended JuneSeptember 30, 2015 and $40,095$90,540 of net revenue or 6.4%12.1% for the three months ended JuneSeptember 30, 2014.

Revenues from foreign customers represented $199,638 of net revenue or 8.6% for the six months ended September 30, 2015 and $130,635 of net revenue or 9.5% for the six months ended September 30, 2014.

 

As of JuneSeptember 30, 2015 and 2014, accounts receivable included $50,637$35,241 and $4,300,$23,128, respectively, from foreign customers.

 

NOTE5 - SEGMENT INFORMATION

 

Information about segments is as follows:

 

  

Chemical

  

Electronics

  

Engineering

  

Total

   

Chemical

  

Electronics

  

Engineering

  

Total

 
Three months ended June 30, 2015                
                 
Three months ended September 30, 2015Three months ended September 30, 2015                

Revenue from external customers

Revenue from external customers

 $385,072  $202,374  $665,435  $1,252,881 

Segment operating (loss)

Segment operating (loss)

 $(141,767) $(62,222) $(143,926) $(347,915)
                
Six months ended September 30, 2015Six months ended September 30, 2015                

Revenue from external customers

Revenue from external customers

 $365,944  $175,229  $514,755  $1,055,928 

Revenue from external customers

 $751,016  $377,603  $1,180,190  $2,308,809 
Segment operating income (loss)Segment operating income (loss) $200,900  $15,668  $217,980  $434,548 

Segment operating income (loss)

 $59,133  $(46,554) $74,050  $86,629 
                                  
Year ended June 30, 2014               
Three months ended September 30, 2014Three months ended September 30, 2014                

Revenue from external customers

Revenue from external customers

 $340,470  $318,203  $89,920  $748,593 

Segment operating income

Segment operating income

 $67,924  $29,756  $31,106  $128,786 
                
Six months ended September 30, 2015Six months ended September 30, 2015                
Revenue from external customersRevenue from external customers $297,159  $242,210  $84,305  $623,674 

Revenue from external customers

 $637,629  $560,413  $174,225  $1,372,267 
Segment operating income (loss)Segment operating income (loss) $87,479  $(8,836) $(42,909) $35,734 

Segment operating income (loss)

 $155,403  $20,920  $(11,804) $164,519 
                                  
Total assets at June 30, 2015$578,168  $276,851  $813,277  $1,668,296 
Total assets at September 30, 2015Total assets at September 30, 2015 $1,026,393  $516,007  $1,612,786  $3,155,085 
                                  
Total assets at March 31, 2015Total assets at March 31, 2015 $509,738  $389,011  $442,868  $1,341,417 Total assets at March 31, 2015 $509,732  $389,005  $442,680  $1,341,417 

 

 

 

NOTENOTE 6 - OPTIONS OUTSTANDING

 

During 2013, ADM granted an aggregate of 5,600,000 stock options to employees and consultants expiring at various dates through fiscal 2015.March 2016. During 2014, 5,000,000 of the outstanding stock options were exercised. The

On September 2, 2015, ADM granted an additional 3,000,000 stock options had variousto employees at an exercise pricesprice of $0.20 per option and were fully vested at the datewith a term of grant.three years. The options were valued at $55,997$598,699 using the Black Scholes option pricing model with the following assumptions: risk free interest rate of 4.9%2.03%, volatility of 414%353%, estimated useful life of 1.53 years, and dividend rate of 0%.

The following table summarizes information on all common share purchase options issued by us as of JuneSeptember 30, 2015 and 2014.

 

 

2015

  

2014

  

2015

  

2014

 
                                
 

# of Shares

  

Weighted Average Exercise Price

  

# of Shares

  

Weighted Average Exercise Price

  

# of Shares

  

Weighted Average Exercise Price

  

# of Shares

  

Weighted Average Exercise Price

 
                                

Outstanding, beginning of year

  600,000  $0.01   5,600,000  $0.01   600,000  $0.02   5,600,000  $0.01 
                                

Issued

  -  $-   -  $-   3,000,000  $0.20   -  $- 
                                

Exercised

  -  $-   (5,000,000) $0.01   -  $-   (5,000,000) $0.01 
                                

Expired

  -  $-   -  $-   -  $-   -  $- 
                                

Outstanding, end of year

  600,000  $0.01   600,000  $0.01   3,600,000  $0.17   600,000  $0.02 
                                

Exercisable, end of year

  600,000  $0.01   600,000  $0.01   3,600,000  $0.17   600,000  $0.02 

 

NOTE 7 - COMMITMENTS AND CONTINGENCIES

 

We lease our office and manufacturing facility under a non-cancelable operating lease, which expires on June 30, 2019. The Company’s future minimum lease commitment at JuneSeptember 30, 2015 is as follows:

 

 

For the twelve month period ending June 30,

 

Amount

 

For the twelve month period ended September 30,

 

Amount

 

2016

 $104,625  $104,625 

2017

  104,625   104,625 

2018

  104,625   78,469 
 $313,875  $287,719 


 

Rent and real estate tax expense for all facilities for the threesix months ended JuneSeptember 30, 2015 and 2014 was approximately $31,000 respectively,$63,000 for each period.

 

MASTER SERVICES AGREEMENT 

 

On February 12, 2010, ADM agreed to provide certain services to Ivivi Health Sciences, LLC (IHS) pursuant to a Master Services Agreement, as described below:

 

 

We provided IHS with engineering services, including quality control and quality assurance services along with regulatory compliance services, warehouse fulfillment services and network administrative services including hardware and software services;

 

 

Effective October 1, 2013 the monthly amount to be paid by IHS for these services was $3,000 plus additional amounts for individual projects requested from time to time by IHS. Pursuant to this agreement, revenues from engineering services to IHS were $9,000 and $18,000 for the three and six months ended JuneSeptember 30, 2015, and 2014 respectively.

   


 

LEGAL PROCEEDINGS

 

NONE

NOTE8 - INCOME TAXES

 

At JuneSeptember 30, 2015, the Company had federal and state net operating loss carry-forwards ("NOL")'s of approximately $3,800,000,$3,692,000, which are due to expire through fiscal 20342034.: These NOLs may be used to offset future taxable income through their respective expiration dates and thereby reduce or eliminate our federal and state income taxes otherwise payable. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Ultimate utilization of such NOL's and credits is dependent upon .the Company's ability to generate taxable income in future periods and may be significantly curtailed if a significant change in ownership occurs.

 

Due to the uncertainty related to future taxable income, the Company provides a 100%partial valuation allowance for the deferred tax benefit resulting from the NOL's and depreciation and amortization. During the six months ended September 30, 2015, the Company utilized approximately $700,000 in net operating losses and expects to utilize $2,800,000 before expiration. For the three and six months ended September 30, 2015, the $857,000 benefit for deferred income taxes results from a reduction in the valuation allowance.

 

NOTE9 – DUE TO SHAREHOLDER

 

The Company’s President has been deferring his salary and bonuses periodically to assist the Company’s cash flow. There are no repayment terms or interest accruing on this liability.

  

NOTE 1010 – SUBSEQUENT EVENTS

 

On August 7, 2015We evaluated all subsequent events from the Company sold 2,068,965 sharesdate of its $.0005 par value common stock to Advanced Plasma Therapies, Inc. (“APT”) for $300,000.  The shares purchased by APTthe condensed consolidated balance sheet through the issuance date of this report and determined that there are restricted securities and have not been registered for public sale.  APT is a privately-held company involvedno events or transactions occurring during the subsequent event reporting period which require recognition or disclosure in the development and commercialization of innovative therapeutic medical plasma technologies.  The Company has been providing APT with engineering services for APT's plasma-based medical technologies currently in clinical development and is expected to manufacture APT products for clinical use and for commercial deployment following receipt of applicable regulatory approvals.  condensed consolidated financial statements.

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our operations and financial condition should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.


 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the "safe harbor" provisions under section 21E of the Securities and Exchange Act of 1934 and the Private Securities Litigation Act of 1995. We use forward-looking statements in our description of our plans and objectives for future operations and assumptions underlying these plans and objectives. Forward-looking terminology includes the words "may", "expects", "believes", "anticipates", "intends", "forecasts", "projects", or similar terms, variations of such terms or the negative of such terms. These forward-looking statements are based on management's current expectations and are subject to factors and uncertainties which could cause actual results to differ materially from those described in such forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this Form 10-Q to reflect any change in our expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based. Factors which could cause such results to differ materially from those described in the forward-looking statements include those set forth under "Item. 1 Description of Business – Risk Factors" and elsewhere in or incorporated by reference into our Annual Report on Form 10-K for the year ended March 31, 2015.      

  

CRITICAL ACCOUNTING POLICIES

 


REVENUE RECOGNITION

 

We recognize revenue from engineering services on a project or monthly basis and contract manufacturing revenues are recognized after shipment of completed products. For the sale of our electronic products, revenues are recognized when they are shipped to the purchaser..purchaser. Shipping and handling charges and costs are de minimis. We offer a limited 90 day warranty on our electronics products and a limited 5 year warranty on our electronic controllers for spas and hot tubs. Historically, the amount of warranty revenue included in the sales of our electronic products have been de minimis. We have no other post shipment obligations and sales returns have been de minimis.

 

Revenues from sales of chemical products are recognized when products are shipped to end users.  Shipments to distributors are recognized as sales where no right of return exists.

 

USE OF ESTIMATES

 

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to reserves, deferred tax assets and valuation allowance, impairment of long-lived assets, fair value of equity instruments issued to consultants for services and fair value of equity instruments issued to others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above described items, are reasonable.

 

BUSINESS OVERVIEW

 

ADM is a corporation that was organized under the laws of the State of Delaware on November 24, 1969. During the threesix months ended JuneSeptember 30, 2015 and 2014, our operations are conducted through ADM Tronics Unlimited, Inc. ("ADM") and its subsidiary, Sonotron Medical Systems, Inc. ("SMI"). In addition, the Company owns a minority interest in Montvale Technologies, Inc. (formerly known as Ivivi Technologies, Inc.) ("ITI"), which until October 18, 2006 was operated as a subsidiary of the Company. ITI was deconsolidated as of October 18, 2006 upon the consummation of ITI's initial public offering.

 

We are a technology-based engineering and manufacturing company with diversified lines of products in the following four areas: (1) electronic products for numerous industries, including therapeutic non-invasive electronic medical devices and electronic controllers for spas and hot tubs, (2) environmentally safe chemical products for industrial use, (3) cosmetic and topical dermatological products and (4) antistatic paint and coatings products.

 

 

 

RESULTS OF OPERATIONS FOR THE THREEAND SIXMONTHS ENDED JUNESEPTEMBER 30, 2015 AS COMPARED TO JUNESEPTEMBER 30,, 2014 2014

 

For the Three Months Ended June 30, 2015

             
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $365,944  $175,229  $514,755  $1,055,928 

Cost of Sales

  53,949   106,350   140,574   300,873 

Gross Profit

  311,995   68,879   374,181   755,055 

Gross Profit Percentage

  85%  39%  73%  72%
                 

Operating Expenses

  111,073   53,203   156,231   320,507 

Operating Income

  200,922   15,676   217,950   434,548 

Other income (expenses)

  (154)  (54)  (112)  (320)

Net Income

 $200,768  $15,622  $217,838  $434,228 
                 

For the Three Months Ended June 30, 2014

             
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $297,159  $242,210  $84,305  $623,674 

Cost of Sales

  90,694   154,064   93,458   338,216 

Gross Profit

  206,465   88,146   (9,153)  285,458 

Gross Profit Percentage

  69%  36%  -11%  46%
                 

Operating Expenses

  118,986   96,982   33,756   249,724 

Operating Income (Loss)

  87,479   (8,836)  (42,909)  35,734 

Other income (expenses)

  44   37   13   94 

Net Income (Loss)

 $87,523  $(8,799) $(42,896) $35,828 
                 

Variance

                
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $68,785  $(66,981) $430,450  $432,254 

Cost of Sales

  (36,745)  (47,714)  47,116   (37,343)

Gross Profit

  105,530   (19,267  383,334   469,597 

Gross Profit Percentage

  16%  3%  84%  26%
                 

Operating Expenses

  (7,913)  (43,779)  122,475   70,783 

Operating Income (Loss)

  113,443   24,512   260,859   398,814 

Other income (expenses)

  (198)  (91)  (125)  (414)

Net Income

 $113,245  $24,421  $260,734  $398,400 

For the Three Months Ended September 30, 2015

  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $385,072  $202,374  $665,435  $1,252,881 

Cost of Sales

  174,205   84,650   236,825   495,680 

Gross Profit

  210,867   117,724   428,610   757,201 

Gross Profit Percentage

  55%  58%  64%  60.4%
                 

Operating Expenses

  352,634   179,946   572,536   1,105,116 

Operating Income (Loss)

  (141,767)  (62,222)  (143,926)  (347,915)

Other income (expenses)

  (140)  (94)  (348)  (582)

Income (loss) before benefit from income taxes

 $(141,907) $(62,316) $(144,274) $(348,497)

For the Three Months Ended September 30, 2014

             
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $340,470  $318,203  $89,920  $748,593 

Cost of Sales

  110,108   138,086   15,675   263,869 

Gross Profit

  230,362   180,117   74,245   484,724 

Gross Profit Percentage

  68%  57%  83%  65%
                 

Operating Expenses

  162,438   150,361   43,139   355,938 

Operating Income (Loss)

  67,924   29,756   31,106   128,786 

Other income (expenses)

  272   240   73   585 

Income (loss) before benefit from income taxes

 $68,196  $29,996  $31,179  $129,371 

Variance

                
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $44,602  $(115,829) $575,515  $504,288 

Cost of Sales

  64,097   (53,436)  221,150   231,811 

Gross Profit

  (19,495)  (62,393)  354,365   272,477 

Gross Profit Percentage

  -13%  2%  -18%  -4%
                 

Operating Expenses

  190,196   29,585   529,397   749,178 

Operating Income (Loss)

  (209,691)  (91,978)  (175,032)  (476,701)

Other income (expenses)

  (412)  (334)  (421)  (1,167)

Income (loss) before benefit from income taxes

 $(210,103) $(92,312) $(175,453) $(477,868)


For the Six Months Ended September 30, 2015

             
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $751,016  $377,603  $1,180,190  $2,308,809 

Cost of Sales

  228,154   191,000   377,399   796,553 

Gross Profit

  522,862   186,603   802,791   1,512,256 

Gross Profit Percentage

  70%  49%  68%  65.5%
                 

Operating Expenses

  463,729   233,157   728,741   1,425,627 

Operating Income (Loss)

  59,133   (46,554)  74,050   86,629 

Other income (expenses)

  (294)  (148)  (460)  (902)

Income (loss) before benefit from income taxes

 $58,839  $(46,702) $73,590  $85,727 

For the Six Months Ended September 30, 2014

             
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $637,629  $560,413  $174,225  $1,372,267 

Cost of Sales

  200,802   292,150   109,133   602,085 

Gross Profit

  436,827   268,263   65,092   770,182 

Gross Profit Percentage

  69%  48%  37%  56%
                 

Operating Expenses

  281,424   247,343   76,896   605,663 

Operating Income (Loss)

  155,403   20,920   (11,804)  164,519 

Other income (expenses)

  316   277   86   679 

Income (loss) before benefit from income taxes

 $155,719  $21,197  $(11,718) $165,198 

Variance

                
  

Chemical

  

Electronics

  

Engineering

  

Total

 

Revenue

 $113,387  $(182,810) $1,005,965  $936,542 

Cost of Sales

  27,352   (101,150)  268,266   194,468 

Gross Profit

  86,035   (81,660)  737,699   742,074 

Gross Profit Percentage

  1%  2%  31%  9%
                 

Operating Expenses

  182,305   (14,186)  651,845   819,964 

Operating Income (Loss)

  (96,270)  (67,474)  85,854   (77,890)

Other income (expenses)

  (610)  (425)  (546)  (1,581)

Income (loss) before benefit from income taxes

 $( 96,880) $( 67,899) $85,308  $( 79,471)

 

 


Revenues were $1,055,928 for the three months ended JuneSeptember 30, 2015 as comparedincreased by $504,288, or 67% due to $623,674 for the three months ended June 30, 2014, an increase of $432,254, or 69%. The increase resulted from an increase in engineering revenue of $430,450$575,515 coupled with an increase in sales in our chemical division of $68,785$44,602 offset by a decrease in our electronic segment in the amount of $66,981.$115,829. The increase in engineering services is primarily the result of several projects for one customer.

Revenues for the six months ended September 30, 2015 increased by $936,542 or 68% due to an increase in engineering revenue of $1,005,965 coupled with an increase in sales in our chemical division of $113,387 offset by a decrease in our electronic segment in the amount of $182,810. The increase in engineering services is primarily the result of several projects for one customer.

   

Gross profit was $755,055, or 71.5%, for the three months ended JuneSeptember 30, 2015 and $285,458, or 45.8%increased by $272,477. Gross profit for the threesix months ended JuneSeptember 30, 2014.2014 increased by $742,074. The increase in gross profit in the electronics and chemical segments resulted from changes in the mix of products sold. The increase in gross profit in the engineering segment resulted from better utilization of labor due to the increased revenue from new projects from one customer.

 

We are highly dependent upon certain customers to generate our revenues.customers. During the three month periodand six months ended JuneSeptember 30, 2015 one customer accounted for 46%42% of our revenue. During the three month periodand six months ended JuneSeptember 30, 2014, anotherone customer accounted for 18% of our revenue. The complete loss of or significant reduction in business from, or a material adverse change in the financial condition of any of our customers could cause a material and adverse change in our revenues and operating results.

 

 

 

Income from operations for the three months ended JuneSeptember 30, 2015 was $434,548 compareddecreased by $476,701 due to $35,734 for the three months ended June 30, 2014.stock based compensation of $598,699. Selling, general, and administrative expenses increased by $59,184$153,685 or 25%48%, from $236,037$321,501 to $295,221$475,186 mainly due to an increase of $40,383 in royalties and commissions and$28,884 wages, a $17,614$23,560 increase in commission and royalty fees, $39,860 in consulting fees.fees, $54,383 in engineering fees and $13,437 in insurance.

Income from operations for the six months ended September 30, 2015 decreased by $77,890. Selling, general, and administrative expenses increased by $196,714 or 34% from $573,697 to $770,411 mainly due to an increase of $40,021 in wages, $63,944 in commission and royalty fees and an increase in contract services of $37,974.

During the six months ended September 30, 2015, we had $598,699 of stock based compensation related to 3,000,000 options granted to employees. There was no stock based compensation for the six months ended September 30, 2014.

 

Interest income decreased $726$1,077 to $321$248 in the three months ended JuneSeptember 30, 2015, from $1,047$1,325 in the three months ended JuneSeptember 30, 2014 and interest income decreased $1,803 to $569 in the six months ended September 30, 2015 from $2,372 in the six months ended September 30, 2014 due to decreased funds invested in a money market account.

 

For the three and six months ended September 30, 2015, the $857,000 credit for deferred income taxes results from a reduction in the valuation allowance.

The foregoing resulted in net income for the three months ended JuneSeptember 30, 2015 of $434,228,$508,503, or $0.01 per share, compared to net income for the three months ended JuneSeptember 30, 2014 of $35,828$129,371 or $0.00 per share.

The net income for the six months ended September 30, 2015 and 2014 was $942,727 or $0.01 per share and $165,198 or $0.00 per share, respectively.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

At JuneSeptember 30, 2015, we had cash and cash equivalents of $370,526$942,143 as compared to $216,395 at March 31, 2015. The $154,131$725,748 increase was primarily the result of cash provided in operations during the threesix month period in the amount of $161,392 offset by$439,097 and cash usedprovided in financing activities in the amount of $7,000 and$287,000 offset by cash used in investing activities of $261.$349. Our cash will continue to be used for increased marketing costs, and the related administrative expenses, in order to attempt to increase our revenue.  We expect to have enough cash to fund operations for the next twelve months. Our note payable of $114,966$108,966 at JuneSeptember 30, 2015, is secured and collateralized by restricted cash of $232,786.$232,874. This note bears an interest rate of 2% above the rate of the savings account. The interest rate at JuneSeptember 30, 2015 was 2.15% and is payable upon demand.

 

Future Sources of Liquidity:

 

We expect that growth in profitable revenues and continued focus on new customers will enable us to continue to generate cash flows from operating activities during fiscal 2016.

 

If we do not generate sufficient cash from operations, face unanticipated cash needs or do not otherwise have sufficient cash, we may need to consider the sale of certain intellectual property which does not support the Company’s operations. In addition, we have the ability to reduce certain expenses depending on the level of business operation.

 

Based on current expectations, we believe that our existing cash of $370,526$942,143 as of JuneSeptember 30, 2015 and other potential sources of cash will be sufficient to meet our cash requirements. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

 


OPERATING ACTIVITIES

 

Net cash provided (used) by operating activities was $161,392$439,097 for the threesix months ended JuneSeptember 30, 2015, as compared to net cash used inprovided by operating activities of $(9,262)$85,040 for the threesix months ended JuneSeptember 30, 2014.  The cash provided during the threesix months ended JuneSeptember 30, 2015 was primarily due to net income of $434,228$942,727, stock based compensation of $598,699, deferred income tax of $857,000 and decreases in operating liabilities of $100,349,$14,759, and net operating assets of $173,287.$232,170.   

 

INVESTING ACTIVITIES

 

Cash was used in investing activities in the amount of $261$349 from deposits in the restricted cash in the amount of $261.$349.

 

FINANCING ACTIVITIES

 

For the threesix months ended JuneSeptember 30, 2015 and 2014, net cash usedprovided (used) in financing activities were $287,000 and $(7,000), respectively. For the six months ended September 30, 2015 and 2014, $13,000 and $7,000 and $4,000, respectively, which werewas used for repayments on a note from a commercial bank to facilitate our acquisition of Action Industries Unlimited, Inc. (AIU).

 


Additionally, during the six months ended September 30, 2015, $300,000 was provided for through the sale of common stock to a major customer.

  

OFF BALANCE SHEET ARRANGEMENTS

 

We have no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

  

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Concentration of Credit Risk

 

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and our investment in ITI. We have no control over the market value of our investment in ITI.

 

We maintain cash and cash equivalents with FDIC insured financial institutions.

 

Our sales are materially dependent on a small group of customers, as noted in Note 4 of our condensed consolidated financial statements. We monitor our credit risk associated with our receivables on a routine basis. We also maintain credit controls for evaluating and granting customer credit.

  

ITEM 4. CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

The Company's management, including the Company's principal executive officer and principal financial officer, have evaluated the effectiveness of the Company's "disclosure controls and procedures," as such term is defined in Ru1e 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were not effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the "SEC") (1) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (2) is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. During the quarterly period ended JuneSeptember 30, 2015, there were no changes in the Company's internal control over financial reporting which materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

 


The determination that our disclosure controls and procedures were not effective as of JuneSeptember 30, 2015 are a result of:

 

a.Deficiencies in Internal Control Structure Environment.The Company experienced net losses for the past several years. During the current year, the Company’s focus was on expanding their customer base to initiate revenue production.  

 

b.Inadequate staffing and supervision within the accounting operations of our company.The relatively small number of employees who are responsible for accounting functions prevents the Company from segregating duties within its internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.  The Company’s plan is to expand its accounting operations as the business of the Company expands.

 

The Company believes that the financial statements fairly present, in all material respects, the Company’s condensed consolidated balance sheets as of JuneSeptember 30, 2015 and March 31, 2015 and the related condensed consolidated statements of operations, stockholders’ equity (deficiency), and cash flows for the three and six months ended JuneSeptember 30, 2015 and 2014, in conformity with generally accepted accounting principles, notwithstanding the material weaknesses we identified. 


 

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

NONE

 

ITEM 1A. RISK FACTORS

 

There have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended March 31, 2015.

  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4.MINE SAFETY DISCLOSURES

 

None

 

ITEM5. 5. OTHER INFORMATION

 

None 

 


ITEM6. 6. EXHIBITS.

 

(a) Exhibit No.

 

31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS**

XBRL Instance

101.SCH**

XBRL Taxonomy Extension Schema

101.CAL**

XBRL Taxonomy Extension Calculation

101.DEF**

XBRL Taxonomy Extension Definition

101.LAB**

XBRL Taxonomy Extension Labels

101.PRE**

XBRL Taxonomy Extension Presentation

 

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

ADM TRONICS UNLIMITED, INC.

 

 

(Registrant)

 

 

 

 

 

 

 

  

 

 

By:

/s/ Andre' DiMino

 

 

 

Andre' DiMino, Chief Executive

 

 

 

Officer and Chief Financial Officer

 

 

 

Dated:

Northvale, New Jersey

 

 

August 14,November 23, 2015

 

 

18