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 December 31, 2017 June 30, 2018

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)

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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:

67,588,49267,588,504 shares of Common Stock, $.0005 par value, as of February 14,August 20, 2018.

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY 

INDEX

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 are1969, and subsidiary (collectively, "we", "us", the “Company" or "ADM"), is a technology-based developer and manufacturer of diversified lines of products and derive revenues from the production and sale of electronics for medical devices and other applications; environmentally safe chemical products for industrial, medical and cosmetic uses; and, research, development, regulatory and engineering services.

The accompanying unaudited condensed consolidated financial statements have been prepared by ADM pursuant to generally accepted accounting principles in the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”) including Form 10-Q10-Q and Regulation S-X.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 should be read in conjunction with the audited consolidated financial statements and explanatory notes for the year ended March 31, 2017 2018 as disclosed in our annual report on Form 10-K10-K for that year. The operating results and cash flows for the three and nine months ended December 31, 2017 (unaudited)June 30, 2018 (unaudited) are not necessarily indicative of the results to be expected for the pending full year ending March 31, 2018.2019. 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of ADM Tronics Unlimited, Inc. and its wholly owned subsidiary Sonotron.Sonotron Medical Systems, Inc. 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 ("US GAAP") 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-day90-day warranty on our electronics products and a limited 5-year5-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,$2,000, for each of the three and nine months ended December 31, 2017 June 30, 2018 and 2016.2017. 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. 

EARNINGS PER SHARE

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the periods. Diluted earnings per share is computed similar to basic earnings 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 earnings amounted to $0.00$0.00 for both the three and nine months ended December 31,June 30, 2018 and June 30, 2017, and $(0.00) and $0.01 for the three and nine months ended December 31, 2016, respectively. There were 3,000,000 common stock equivalents at December 31,June 30, 2018 and 2017, and 2016,respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective April 1, 2018 the Company adopted ASC Topic 606 “Revenue from Contracts with Customers”, using the modified retrospective method. This guidance supersedes nearly all existing revenue recognition guidance under US GAAP. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The Company has drafted its accounting policy for the new standard based on a detailed review of its business and contracts. Based on the new guidance, the Company will continue recognizing revenue at the time it’s products are shipped, and therefore adoption of the standard did not have a material impact on its financial statements and is not expected to have a material impact in the future.

In July 2015, the FASB issued ASU 2015-11, “Inventory. Simplifying the Measurement of Inventory.” This amendment requires companies to measure inventory at the lower of cost and net realizable value. The Company adopted this amendment in April of 2017, and the implementation did not have a material impact on the Company's financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate and manufacturing equipment, to recognize both assets and liabilities on their balance sheet for the rights to use those assets for the lease term and obligations to make the lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU will be adopted by the Company in April 2019. We do not believe that this ASU will have a material impact on our financial statements.

In June 2016, the FASB issued ASU-2016-13 “Financial Instruments – Credit Losses”. This guidance affects organizations that hold financial assets and net investments in leases that are not accounted for at fair value with changes in fair value reported in net income. The guidance requires organizations to measure all expected credit losses for financial instruments at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. It is effective for fiscal years beginning after December 15, 2019. The Company is evaluating the potential impact on the Company’s financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance gives businesses the option of reclassifying to retained earnings the so-called “stranded tax effects” left in accumulated other comprehensive income due to the reduction in the corporate income tax rate resulting from the 2017 Tax Cuts and Jobs Act. This amendment is effective for all organizations for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is allowed. We do not believe that this ASU will have a material impact on our financial statements.

In June 2018, the FASB issued ASU 2018-07, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance intends to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. This amendment is effective for public companies with fiscal years beginning after December 15, 2018, include interim period within that fiscal year. Early adoption is permitted. This ASU does not apply to the company at this time.

Management is still evaluating the impact ofdoes not believe that any other recently issued, but not yet effective accounting pronouncements,pronouncement, if adopted. The effects of the standardsadopted, would have a material effect on the Company’saccompanying consolidated financial statements are not known at this time.  statements.

NOTE 3 - INVENTORIES       

NOTE 4 – CONCENTRATIONS

During the three months endedDecember 31, 2017 three  June 30, 2018 two customers accounted for 52% of our net revenue. During the ninethree months ended December 31,June 30, 2017 threetwo customers accounted for 59%60% of our net revenue.

During the three-month period ended December 31, 2016, one customer accounted for 71% of our net revenue.  During the nine-month period ended December 31, 2016, one customer accounted for 61% of our net revenue

As of December 31, 2017, June 30, 2018, three customers represented 90%97% of our accounts receivable.

As of March 31, 2017, one customer2018, two customers represented 83%93% of our accounts receivable.

The Company’sCompany’s customer base is comprised of foreign and domestic entities with diverse demographics. Net revenues from foreign customers for the three and nine months ended December 31, 2017 June 30, 2018 was $92,967$101,965 or 10% and $251,825 or 8%, respectively.13%

Revenues from foreign customers represented $48,750$68,381 of net revenue or 4.2%6% for the three months ended December 31, 2016. Revenues from foreign customers represented $602,405 of net revenue or 15.4% for the nine months ended December 31, 2016.June 30, 2017

As ofDecember 31, 2017,   June 30, 2018, and March 31, 2017, 2018, accounts receivable included $1,902$32,251 and $48,213,$39,995, respectively, from foreign customers.

NOTE5 - SEGMENT INFORMATIONNet Revenues and Segment Information

Information about segmentsNo sales to an individual customer or country other than the U.S. accounted for more than 10% of net revenue during the three months ended June 30, 2018 and 2017.  Net revenue, classified by geography, is as follows:

Net revenue by products and services is as follows:

Net revenue by segment is as follows:

NOTE6 - OPTIONS OUTSTANDING 

On September 2, 2015, ADM granted 3,000,000 stock options to employees at an exercise price of $0.20$0.20 per option and with a term of three years. The options were valued at $598,699$598,699 using the Black Scholes option pricing model with the following assumptions: risk free interest rate of 2.03%, volatility of 353%, estimated useful life of 3 years and dividend rate of 0%.

The following table summarizes information on all common share purchase options issued by us for the periodsthree month period endedDecember 31, 2017 June 30, 2018 and the year ended March 31, 2017.

2018.

 NOTE 7 - COMMITMENTS AND CONTINGENCIES

We lease our office and manufacturing facility under a non-cancelable operating lease, which expires on June 30, 2018.2028. The Company’s future minimum lease commitment at December 31, 2017 June 30, 2018 is as follows: 

Rent and real estate tax expense for all facilities for the three and nine months ended December 31,June 30, 2018 and 2017and 2016 was approximately $28,000$35,000 and $96,000,$32,000, respectively. 

On December 2, 2016, the Company entered into a capital lease agreement with a commercial bank in the amount of $85,680,$85,680, including $6,930$6,930 in deferred interest, for the purchase of certain property and equipment. The lease has a term of forty-eight (48) (48) months and is payable in forty-eight equal installments of $1,785.$1,785. The balance of this obligation as ofDecember 31, 2017,   June 30, 2018, was $57,422.$47,578.

On December 2, 2016, the Company entered into a capital lease agreement with a commercial bank in the amount of $54,710,$54,710, including $4,710$4,710 in deferred interest, for the purchase of certain property and equipment. The lease has a term of forty-eight (48) (48) months and is payable in forty-eight equal installments of $1,139.$1,139. The balance of this obligation as ofDecember 31, 2017,   June 30, 2018, was $36,458$30,208. 

NOTE 8 – LINE OF CREDIT

On June 15, 2018, the Company obtained an unsecured revolving line of credit, with a limit of $400,000.  The line expires May 16, 2019, renewing automatically every year.  The Company is required to make monthly interest payments, at a rate of 5.37%.  Any unpaid principal will be due upon maturity.  At June 30, 2018, the outstanding balance was $35,000.

NOTE89- INCOME TAXES

AtDecember 31, 2017,   June 30, 2018, the Company had federal net operating loss carry-forwards ("NOL")'s of approximately $1,881,000, which are due to expire through fiscal 2034.$1,950,000. These NOLs may be used to offset future taxable income through their respective expiration dates and thereby reduce or eliminate our federal 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'sNOLs and research and development 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.

The Company provides a partial valuation allowance for the deferred tax asset resulting from the uncertainty that the stock-based compensation will be deductible. During the ninethree months ended December 31, 2017, June 30, 2018, the Company utilized approximately $407,000$22,000 in net operating losses and expects to utilize the entire $1,881,000$1,950,000 before expiration.

The effective rates were approximately 97% and 0% for thethree and nine months ended December 31,June 30, 2018 and 2017, and 2016,respectively.

The Tax cuts and Job Acts, enacted on December 22, 2017, among other provisions, reduces the top corporate tax rate from 35% to a flat 21% and eliminates the Corporate Alternative Minimum Tax for tax years beginning after January 1, 2018. This new law change necessitated a discrete adjustment to reduce the deferred income tax asset by $227,000.

NOTE910 – DUE TO STOCKHOLDER

The Company’sCompany’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 1011 – RESTATEMENTS

During the audit of March 31, 2018, it was discovered that there were certain inventory and segment allocation errors during the previous quarters. The June 2017 condensed consolidated statements of income and cash flows reflects these restatements.

NOTE 12 – SUBSEQUENT EVENTS

We evaluated all subsequent events from the date of the condensed consolidated balance sheet through the issuance date and determined that there are no events or transactions occurring during the subsequent event reporting period which require recognition or disclosure in the condensed consolidated financial statements.