UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2023
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 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☒ |
Emerging growth company ☐ |
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 ☒
State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date:
The Company has 67,588,492 shares outstanding as of AugustNovember 14, 2023.
ADMADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
INDEX
Page Number | ||
Part I - Financial Information | ||
Item 1. | Condensed Consolidated Financial Statements (unaudited): | |
Condensed Consolidated Balance Sheets | 3 | |
Condensed Consolidated Statements of Operations for the three and six months ended | 4 | |
Condensed Consolidated Statement of Stockholders’ Equity for the three and six months ended | 5 | |
Condensed Consolidated Statements of Cash Flows for the | 6 | |
Notes to Condensed Consolidated Financial Statements | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
|
Item 4. | Controls and Procedures | 18 |
Part II - Other Information | ||
Item 1. | Legal Proceedings | 18 |
Item 1A. | Risk Factors |
|
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
|
Item 3. | Defaults Upon Senior Securities |
|
Item 4. | Mine Safety Disclosures |
|
Item 5. | Other Information | 19 |
Item 6. | Exhibits | 19 |
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, | March 31, | September 30, | March 31, | |||||||||||||
2023 | 2023 | 2023 | 2023 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 844,731 | $ | 1,003,730 | $ | 716,323 | $ | 1,003,730 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $719,871 and $694,871 at June 30, 2023 and March 31, 2023, respectively | 575,545 | 497,793 | ||||||||||||||
Accounts receivable, net of allowance for credit losses of $429,872 and $694,871 at September 30, 2023 and March 31, 2023, respectively | 873,603 | 497,793 | ||||||||||||||
Inventories | 509,828 | 443,465 | 396,761 | 443,465 | ||||||||||||
Prepaid expenses and other current assets | 31,987 | 41,251 | 23,904 | 41,251 | ||||||||||||
| Total current assets | 1,962,091 | 1,986,239 | 2,010,591 | 1,986,239 | ||||||||||||
Other Assets: | ||||||||||||||||
Property and equipment, net of accumulated depreciation of $203,560 and $181,289 at March 31, 2022 and March 31, 2021, respectively | - | - | ||||||||||||||
| Long-term inventory | 188,863 | 228,451 | $ | 188,117 | $ | 228,451 | ||||||||||
Operating lease right-of-use asset | 461,422 | 481,535 | 441,053 | 481,535 | ||||||||||||
Loan receivable | 215,309 | 209,809 | - | 209,809 | ||||||||||||
Due from affiliate | 80,090 | 80,090 | - | 80,090 | ||||||||||||
Intangible assets, net of accumulated amortization of $23,351 and $22,631 at June 30, 2023 and March 31, 2023, respectively | 12,443 | 13,163 | ||||||||||||||
Intangible assets, net of accumulated amortization of $24,071 and $22,631 at September 30, 2023 and March 31, 2023, respectively | 11,723 | 13,163 | ||||||||||||||
Other assets | 90,538 | 90,538 | 90,538 | 90,538 | ||||||||||||
Total other assets | 1,048,665 | 1,103,586 | 731,431 | 1,103,586 | ||||||||||||
Total assets | $ | 3,010,756 | $ | 3,089,825 | $ | 2,742,022 | $ | 3,089,825 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
Accounts payable | $ | 278,714 | $ | 322,639 | $ | 282,408 | $ | 322,639 | ||||||||
| Bank overdraft | 150,728 | 134,837 | 53,236 | 134,837 | ||||||||||||
Accrued expenses and other current liabilities | 108,878 | 75,659 | 76,709 | 75,659 | ||||||||||||
PPP loan | 10,311 | 11,656 | 8,966 | 11,656 | ||||||||||||
Line of credit | 215,116 | 112,809 | 297,339 | 112,809 | ||||||||||||
Operating lease liability | 85,565 | 82,917 | 86,639 | 82,917 | ||||||||||||
Customer deposits | 332,442 | 359,723 | 363,272 | 359,723 | ||||||||||||
Due to stockholder | 6,409 | 13,626 | - | 13,626 | ||||||||||||
Total current liabilities | 1,188,163 | 1,113,866 | 1,168,569 | 1,113,866 | ||||||||||||
| Long-term liabilities | ||||||||||||||||
Operating lease liability less current portion | 388,337 | 410,474 | 366,270 | 410,474 | ||||||||||||
Total long-term liabilities | 388,337 | 410,474 | 366,270 | 410,474 | ||||||||||||
Total liabilities | 1,576,500 | 1,524,340 | 1,534,839 | 1,524,340 | ||||||||||||
| 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 shares authorized, 67,588,492 shares issued and outstanding | 33,794 | 33,794 | 33,794 | 33,794 | ||||||||||||
Additional paid-in capital | 33,600,548 | 33,599,516 | 33,601,580 | 33,599,516 | ||||||||||||
Accumulated deficit | (32,200,086 | ) | (32,067,825 | ) | (32,428,191 | ) | (32,067,825 | ) | ||||||||
Total stockholders' equity | 1,434,256 | 1,565,485 | 1,207,183 | 1,565,485 | ||||||||||||
Total liabilities and stockholders' equity | $ | 3,010,756 | $ | 3,089,825 | $ | 2,742,022 | $ | 3,089,825 | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY | |||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
| |||||
(Unaudited) |
Three months ended | Six months ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
Net revenues | $ | 762,689 | $ | 921,408 | $ | 754,132 | $ | 1,140,268 | $ | 1,516,821 | $ | 2,061,676 | ||||||||||||
Cost of sales | 437,547 | 538,349 | 547,980 | 582,235 | 985,527 | 1,120,584 | ||||||||||||||||||
Gross Profit | 325,142 | 383,059 | 206,152 | 558,033 | 531,294 | 941,092 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
Research and development | 130,587 | 123,600 | 131,743 | 136,102 | 262,330 | 259,702 | ||||||||||||||||||
Selling, general and administrative | 332,351 | 294,084 | 302,059 | 319,039 | 634,410 | 613,123 | ||||||||||||||||||
Total operating expenses | 462,938 | 417,684 | 433,802 | 455,141 | 896,740 | 872,825 | ||||||||||||||||||
| Loss from operations | (137,796 | ) | (34,625 | ) | ||||||||||||||||||||
| Income (loss) from operations | (227,650 | ) | 102,892 | (365,446 | ) | 68,267 | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest income | 8,001 | 473 | 6,592 | 521 | 14,593 | 994 | ||||||||||||||||||
Interest and finance expenses | (2,466 | ) | (4,514 | ) | (7,047 | ) | (3,370 | ) | (9,513 | ) | (7,884 | ) | ||||||||||||
Total other income (expense) | 5,535 | (4,041 | ) | (455 | ) | (2,849 | ) | 5,080 | (6,890 | ) | ||||||||||||||
| Loss before provision for taxes | (132,261 | ) | (38,666 | ) | ||||||||||||||||||||
| Income (loss) before provision for income taxes | (228,105 | ) | 100,043 | (360,366 | ) | 61,377 | ||||||||||||||||||
Net loss | $ | (132,261 | ) | $ | (38,666 | ) | ||||||||||||||||||
Net income (loss) | $ | (228,105 | ) | $ | 100,043 | $ | (360,366 | ) | $ | 61,377 | ||||||||||||||
Basic and diluted loss per common share: | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||||||||||||
Basic and diluted per common share: | $ | (0.00 | ) | $ | 0.00 | $ | (0.01 | ) | $ | 0.00 | ||||||||||||||
Weighted average shares of common stock outstanding - basic and diluted | 67,588,492 | 67,588,492 | 67,588,492 | 67,588,492 | 67,588,492 | 67,588,492 | ||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREESIX MONTHS ENDED JUNESEPTEMBER 30, 2023 AND 2022
Common Stock | Common Stock | Additional Paid-in | Accumulated | Common Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Total | Shares | Amount | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at April 1, 2022 | 67,588,492 | $ | 33,794 | $ | 33,311,672 | $ | (31,971,503 | ) | $ | 1,373,963 | 67,588,492 | $ | 33,794 | $ | 33,311,672 | $ | (31,971,503 | ) | $ | 1,373,963 | ||||||||||||||||||||
Stock based compensation | 287,844 | 287,844 | 287,844 | 287,844 | ||||||||||||||||||||||||||||||||||||
Net (loss) | $ | (38,666 | ) | $ | (38,666 | ) | $ | (38,666 | ) | (38,666 | ) | |||||||||||||||||||||||||||||
Balance at June 30, 2022 | 67,588,492 | $ | 33,794 | $ | 33,599,516 | $ | (32,010,169 | ) | $ | 1,623,141 | 67,588,492 | $ | 33,794 | $ | 33,599,516 | $ | (32,010,169 | ) | $ | 1,623,141 | ||||||||||||||||||||
Net (loss) | $ | 100,043 | 100,043 | |||||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | 67,588,492 | $ | 33,794 | $ | 33,599,516 | $ | (32,110,212 | ) | $ | 1,523,098 | ||||||||||||||||||||||||||||||
Balance at April 1, 2023 | 67,588,492 | $ | 33,794 | $ | 33,599,516 | $ | (32,067,825 | ) | $ | 1,565,485 | 67,588,492 | $ | 33,794 | $ | 33,599,516 | $ | (32,067,825 | ) | $ | 1,565,485 | ||||||||||||||||||||
Stock based compensation | 1,032 | 1,032 | 1,032 | 1,032 | ||||||||||||||||||||||||||||||||||||
Net income (loss) | (132,261 | ) | (132,261 | ) | ||||||||||||||||||||||||||||||||||||
Net (loss) | (132,261 | ) | (132,261 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | 67,588,492 | $ | 33,794 | $ | 33,600,548 | $ | (32,200,086 | ) | 1,434,256 | 67,588,492 | $ | 33,794 | $ | 33,600,548 | $ | (32,200,086 | ) | $ | 1,434,256 | |||||||||||||||||||||
Stock based compensation | 1,032 | 1,032 | ||||||||||||||||||||||||||||||||||||||
Net (loss) | (228,105 | ) | (228,105 | ) | ||||||||||||||||||||||||||||||||||||
Balance at September 30, 2023 | 67,588,492 | $ | 33,794 | $ | 33,601,580 | $ | (32,428,191 | ) | $ | 1,207,183 | ||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
FOR THE |
(Unaudited) |
2023 | 2022 | 2023 | 2022 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (132,261 | ) | $ | (38,666 | ) | $ | (360,366 | ) | $ | 61,377 | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Amortization | 720 | 720 | 1,440 | 1,440 | ||||||||||||
Write-off of inventories | 19,404 | 6,976 | 28,710 | 23,853 | ||||||||||||
Bad debt | 25,000 | - | ||||||||||||||
Credit recoveries | (305,090 | ) | - | |||||||||||||
| Loan impairment | 209,809 | |||||||||||||||
Non-cash interest expense | 5,981 | 7,006 | 11,706 | 13,780 | ||||||||||||
Amortization of right-to-use asset | 20,114 | 20,526 | 40,482 | 41,051 | ||||||||||||
Stock based compensation | 1,032 | 35,848 | 2,064 | (2,876 | ) | |||||||||||
Changes in operating assets and liabilities balances: | ||||||||||||||||
Accounts receivable | (102,752 | ) | (79,796 | ) | (70,720 | ) | 125,549 | |||||||||
| Due from affiliate | 80,090 | - | ||||||||||||||
| Inventories | (46,179 | ) | (147,409 | ) | 58,328 | (121,590 | ) | |||||||||
Prepaid expenses and other current assets | 9,264 | (40,160 | ) | 17,347 | 46,091 | |||||||||||
Loan receivable | (5,500 | ) | - | - | (76,504 | ) | ||||||||||
Accounts payable | (43,925 | ) | 146,078 | (40,231 | ) | 2,685 | ||||||||||
Bank overdraft | 15,891 | - | (81,601 | ) | - | |||||||||||
Customer deposits | (27,281 | ) | (20,689 | ) | 3,549 | (70,995 | ) | |||||||||
Accrued expenses and other current liabilities | 33,217 | (29,187 | ) | 1,050 | (56,813 | ) | ||||||||||
| Payments of operating lease liability | (25,469 | ) | (25,469 | ) | (52,188 | ) | (50,937 | ) | ||||||||
Net cash (used in) operating activities | (252,744 | ) | (164,222 | ) | ||||||||||||
Net cash provided by (used in) operating activities | (455,621 | ) | (63,889 | ) | ||||||||||||
Cash flows provided in financing activities: | ||||||||||||||||
Cash flows provided (used) in financing activities: | ||||||||||||||||
Due to shareholder | (7,217 | ) | (10,187 | ) | (13,626 | ) | (20,373 | ) | ||||||||
Proceeds from line of credit | 105,037 | 48,148 | 192,060 | 82,424 | ||||||||||||
| Repayments of line of credit | (2,730 | ) | (23,346 | ) | (7,530 | ) | (179,477 | ) | ||||||||
Payments to PPP loan | (1,345 | ) | (1,345 | ) | ||||||||||||
| Borrowing from (repayments to) stockholder | - | - | ||||||||||||||
Proceeds (payments) from/to PPP loan | (2,690 | ) | (2,690 | ) | ||||||||||||
Net cash provided by financing activities | 93,745 | 13,270 | ||||||||||||||
Net cash provided by (used in) financing activities | 168,214 | (120,116 | ) | |||||||||||||
Net (decrease) in cash and cash equivalents | (158,999 | ) | (150,952 | ) | ||||||||||||
Net decrease in cash and cash equivalents | (287,407 | ) | (184,005 | ) | ||||||||||||
Cash and cash equivalents - beginning of period | 1,003,730 | 1,038,498 | 1,003,730 | 1,038,498 | ||||||||||||
Cash and cash equivalents - end of period | $ | 844,731 | $ | 887,546 | $ | 716,323 | $ | 854,493 | ||||||||
Cash paid for: | ||||||||||||||||
Interest | $ | 2,466 | $ | 4,514 | $ | 9,513 | $ | 7,884 | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNESEPTEMBER 30, 2023 AND 2022
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 onNovember 24,, 1969. We are a manufacturing and engineering concern whose principal lines of business are the design, manufacture, and sale of electronics of our own products or on a contract manufacturing basis; the production and sale of chemical and antistatic products; and, research, development and engineering services.
Electronic equipment is manufactured in accordance with customer specifications on a contract basis. Our electronic device product line consists principally of proprietary devices used in diagnostics and therapeutics of humans and animals and electronic controllers for spas and hot tubs. These products are sold to customers located principally in the United States. We are registered with the FDA as a contract manufacturing facility and we manufacture medical devices for customers in accordance with their designs and specifications. Our chemical product line is principally comprised of water-based chemical products used in the food packaging and converting industries, and anti-static conductive paints, coatings and other products. These products are sold to customers located in the United States, Australia, Asia and Europe. We also provide research, development, regulatory, and engineering services to customers. Our Sonotron Medical Systems, Inc. subsidiary (“Sonotron”) is involved in medical electronic therapeutic technology.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by ADM pursuant to accounting principles generally accepted in the United States of America (“GAAP”) 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 GAAP 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, 2023 as disclosed in our annual report on Form 10-K10-K for that year. Unaudited interim results are not necessarily indicative of the results for the full fiscal year ending March 31, 2023.2024. The consolidated balance sheet as of March 31, 20222023 was derived from the audited consolidated financial statements as of and for the year then ended.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of ADM Tronics Unlimited, Inc. and its wholly owned subsidiary, Sonotron (the “Company”). 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 GAAP and, accordingly, requires 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 deferred tax assets and related valuation allowance, write down of inventory, impairment of long-lived assets, allowance for doubtful accounts, and warranty reserves. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of our financial instruments, including accounts receivable, accounts payable, and accrued expenses, the carrying amounts approximate the fair value due to their relatively short maturities.
CASH AND CASH EQUIVALENTS
Cash equivalents are comprised of highly liquid investments with original maturities of three months or less when purchased. We maintain our cash in bank deposit accounts, which at times, may exceed federally insured limits. We have not experienced any losses to date as a result of this policy. Cash and cash equivalents held in these accounts are currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000.$250,000. At JuneSeptember 30, 2023 and March 31, 2023, approximately $595,000$466,000 and $638,000, respectively, exceeded the FDIC limit.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at the amount management expects to collect from outstanding balances. The carrying amounts of accounts receivable is reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed the due date and estimates the portion, if any, of the balance that will be collected. Management provides for probable uncollectible amounts through a charge to expenses and a credit to a valuation allowance, based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.
REVENUE RECOGNITION
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 contract manufacturing, and a limited 5-year warranty on our electronic controllers for spas and hot tubs. Historically, the amount of warranty expense included in sales of our electronic products have been de minimis. We have no other post shipment obligations. For contract manufacturing, revenues are recognized after shipments of the completed products.
Amounts received from customers in advance of our satisfaction of applicable performance obligations are recorded as customer deposits. Such amounts are recognized as revenues when the related performance obligations are satisfied. Customer deposits of approximately $27,000$57,000 and $39,000$84,000 were recognized as revenues during the three and six months ended JuneSeptember 30, 2023 and $27,000 and $62,000 for the three and six months ended September 30, 2022, respectively.
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.
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 over time as the applicable performance obligations are satisfied.
All revenue is recognized net of discounts.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out(first-in, first-out method) and net realizable value. Inventories that are expected to be sold within one operating cycle (1(1 year) are classified as a current asset. Inventories that are not expected to be sold within 1 year, based on historical trends, are classified as Inventories - long term portion. Obsolete inventory is written off based on prior and expected future usage.
Long-Term Inventory: Due to recent shortages of materials relating to supply chain and COVID issues, when an item the Company believes will be used in the future, even beyond the current fiscal year, becomes available, it will purchase as many items as management deems necessary to fulfill future orders.
PROPERTY AND EQUIPMENT
We record our property and equipment at historical cost. We expense maintenance and repairs as incurred. Depreciation is provided for by the straight-line method over five to seven years, the estimated useful lives of the property and equipment. As of JuneSeptember 30, 2023, all fixed assets were fully depreciated.
ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to $6,184$4,434 and $11,133 and $8,796 and $15,031 for the three and six months ended JuneSeptember 30, 2023 and JuneSeptember 30, 2022, respectively.
NET LOSS PER SHARE
We compute basic earnings per share by dividing net income/loss by the weighted average number of common shares outstanding. 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. Common equivalent shares are excluded from the computation of net earnings per share if their effect is anti-dilutive.
There were no anti-dilutive instruments in force during the periods ended JuneSeptember 30, 2023 and 2022, respectively.
Per share basic and diluted income/(loss) amounted to $(0.00) and $(0.00)0.00 for the three months ended JuneSeptember 30, 2023 and 2022, respectively. Per share basic and diluted income/(loss) amounted to $(0.01) and $0.00 for the six months ended September 30, 2023 and 2022, respectively.
RECLASSIFICATION
Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net loss.
NEW ACCOUNTING STANDARDS
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of April 1, 2023. These standards replace the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measure at amortized cost to be presented at the net amount expected to be collected. The Company determined that this change does not have a material impact to the financial statements or financial statement disclosures.
NOTE 3 - INVENTORIES
Inventories at June 30, 2023 consisted of the following: | ||||||||||||
Current | Long Term | Total | ||||||||||
Raw materials | $ | 411,068 | $ | 182,866 | $ | 593,934 | ||||||
Finished goods | 98,760 | 5,997 | 104,757 | |||||||||
Totals | $ | 509,828 | $ | 188,863 | $ | 698,691 | ||||||
Inventories at September 30, 2023 consisted of the following: | ||||||
Current | Long Term | Total | ||||||||||
Raw materials | $ | 335,572 | $ | 182,119 | $ | 517,691 | ||||||
Finished goods | 61,189 | 5,998 | 67,187 | |||||||||
Totals | $ | 396,761 | $ | 188,117 | $ | 584,878 | ||||||
Inventories at March 31, 2023 consisted of the following: | ||||||||||||
Current | Long Term | Total | ||||||||||
Raw materials | $ | 390,792 | $ | 201,317 | $ | 592,109 | ||||||
Finished goods | 52,673 | 27,134 | 79,807 | |||||||||
Totals | $ | 443,465 | $ | 228,451 | $ | 671,916 | ||||||
NOTE 4 - INTANGIBLE ASSETS
Intangible assets are being amortized using the straight-line method over periods ranging from 10-15 years with a weighted average remaining life of approximately 6 years.
June 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||||||||
Cost | Weighted Average Amortization Period (Years) | Accumulated Amortization | Net Carrying Amount | Cost | Weighted Average Amortization Period (Years) | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||
Patents & Trademarks | $ | 35,794 | 10 - 15 | $ | (23,351 | ) | $ | 12,443 | $ | 35,794 | 10 - 15 | $ | (22,631 | ) | $ | 13,163 | ||||||||||||||||
September 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||||||||||
Cost | Weighted Average Amortization Period (Years) | Accumulated Amortization | Net Carrying Amount | Cost | Weighted Average Amortization Period (Years) | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||
Patents & Trademarks | $ | 35,794 | 10 | - | 15 | $ | (24,071 | ) | $ | 11,723 | $ | 35,794 | 10 | - | 15 | $ | (22,631 | ) | $ | 13,163 | ||||||||||||||
Estimated aggregate future amortization expense related to intangible assets is as follows: | ||||||||||
For the fiscal years ended March 31, | ||||||||
2024 | 2,163 | $ | 1,443 | |||||
2025 | 2,466 | 2,466 | ||||||
2026 | 1,980 | 1,980 | ||||||
2027 | 1,725 | 1,725 | ||||||
2028 | 1,725 | 1,725 | ||||||
Thereafter | 2,384 | 2,384 | ||||||
| 12,443 | $ | 11,723 | ||||||
NOTE 5– CONCENTRATIONS
During the three months ended JuneSeptember 30, 2023, two customers accounted for 40%48% of our net revenue. During the three months ended JuneSeptember 30, 2022, onethree customercustomers accounted for 44%65% of net revenue.
During the six months ended September 30, 2023, two customers accounted for 42% of our net revenue. During the three months ended September 30, 2022, two customers accounted for 50% of net revenue.
As of JuneSeptember 30, 2023, twothree customers represented 79%69% of our gross accounts receivable. As of March 31, 2023, two customers accounted for 40%75% of our gross accounts receivable.
As of JuneSeptember 30, 2023, threetwo vendors accounted for over 50%42% of our accounts payable balance.
The Company’s customer base is comprised of foreign and domestic entities with diverse demographics. Net revenues from foreign customers for the three and six months ended JuneSeptember 30, 2023 were $119,034$79,106 or 16%.10% of net sales and $198,141 or 13% of net sales, respectively.
Net revenues from foreign customers for the three and six months ended JuneSeptember 30, 2022 were $125,275$86,296 or 14%.8% of net sales and $211,571 or 10% of net sales, respectively.
NOTE 6 - DISAGGREGATED REVENUES AND SEGMENT INFORMATION
The following tables show the Company's revenues disaggregated by reportable segment and by product and service type:
Three Months Ended June 30, | Three months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net Revenue in the US | ||||||||||||||||
Chemical | $ | 218,971 | $ | 246,900 | $ | 203,804 | $ | 259,099 | ||||||||
Electronics | 266,163 | 464,692 | 392,878 | 633,857 | ||||||||||||
Engineering | 158,521 | 84,541 | 78,344 | 161,016 | ||||||||||||
| 643,655 | 796,133 | 675,026 | 1,053,972 | |||||||||||||
| Net Revenue outside the US | ||||||||||||||||
Chemical | 119,034 | 125,275 | 79,106 | 86,296 | ||||||||||||
Electronics | - | - | - | - | ||||||||||||
Engineering | - | - | - | - | ||||||||||||
| 119,034 | 125,275 | 79,106 | 86,296 | |||||||||||||
Total Revenues | $ | 762,689 | $ | 921,408 | $ | 754,132 | $ | 1,140,268 | ||||||||
Six Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Net Revenue in the US | ||||||||
Chemical | $ | 422,774 | $ | 505,999 | ||||
Electronics | 659,041 | 1,098,549 | ||||||
| Engineering | 236,865 | 245,557 | ||||||
| 1,318,680 | 1,850,105 | |||||||
Net Revenue outside the US | ||||||||
Chemical | 198,141 | 211,571 | ||||||
Electronics | - | - | ||||||
Engineering | - | - | ||||||
| 198,141 | 211,571 | |||||||
Total Revenues | $ | 1,516,821 | $ | 2,061,676 | ||||
Information about segments is as follows: | |||||||
Chemical | Electronics | Engineering | Total | Chemical | Electronics | Engineering | Total | |||||||||||||||||||||||||
Three months ended June 30, 2023 | ||||||||||||||||||||||||||||||||
Three months ended September 30, 2023 | ||||||||||||||||||||||||||||||||
Revenue from external customers | $ | 282,910 | $ | 392,878 | $ | 78,344 | $ | 754,132 | ||||||||||||||||||||||||
Segment operating (loss) | $ | (115,567 | ) | $ | (102,070 | ) | $ | (10,013 | ) | $ | (227,650 | ) | ||||||||||||||||||||
Six months ended September 30, 2023 | ||||||||||||||||||||||||||||||||
Revenue from external customers | $ | 620,915 | $ | 681,307 | $ | 214,599 | $ | 1,516,821 | ||||||||||||||||||||||||
Segment operating (loss) | $ | (195,355 | ) | $ | (153,512 | ) | $ | (16,579 | ) | $ | (365,446 | ) | ||||||||||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||||||||||||||||||
Revenue from external customers | $ | 338,005 | $ | 266,163 | $ | 158,521 | $ | 762,689 | $ | 345,395 | $ | 633,857 | $ | 161,016 | $ | 1,140,268 | ||||||||||||||||
Segment operating income | $ | (79,788 | ) | $ | (73,708 | ) | $ | 15,700 | $ | (137,796 | ) | $ | 1,018 | $ | 43,226 | $ | 58,648 | $ | 102,892 | |||||||||||||
Three months ended June 30, 2022 | ||||||||||||||||||||||||||||||||
Six months ended September 30, 2022 | ||||||||||||||||||||||||||||||||
Revenue from external customers | $ | 372,175 | $ | 464,692 | $ | 84,541 | $ | 921,408 | $ | 717,570 | $ | 1,098,549 | $ | 245,557 | $ | 2,061,676 | ||||||||||||||||
Segment operating income | $ | 11,393 | $ | (66,655 | ) | $ | 20,637 | $ | (34,625 | ) | ||||||||||||||||||||||
Segment operating income (loss) | $ | 12,411 | $ | (23,429 | ) | $ | 79,285 | $ | 68,267 | |||||||||||||||||||||||
Total assets at June 30, 2023 | $ | 1,324,733 | $ | 1,053,765 | $ | 632,258 | $ | 3,010,756 | ||||||||||||||||||||||||
Total assets at September 30, 2023 | $ | 1,124,229 | $ | 1,233,910 | $ | 383,883 | $ | 2,742,022 | ||||||||||||||||||||||||
Total assets at March 31, 2023 | $ | 1,050,541 | $ | 1,575,811 | $ | 463,473 | $ | 3,089,825 | $ | 1,050,541 | $ | 1,575,811 | $ | 463,473 | $ | 3,089,825 | ||||||||||||||||
NOTE 7 – DUE FROM AFFILIATE
The Company has a $75,000 investment for 23.2% of Qol Devices Inc. (Qol). It was determined that the Company does not hold a significant influence which results in us carrying this asset at cost and reported as a component of other assets in the accompanying consolidated balance sheets.
The Company provided $330,090 in engineering services to Qol during the year ended March 31, 2018. This amount is shown net of a $330,090 and $250,000 allowance for doubtful accountscredit losses on the consolidated balance sheets as of JuneSeptember 30, 2023 and March 31, 2023.
NOTE 8– LEASES
We lease our office and manufacturing facility under a non-cancelable operating lease, which expires on June 30, 2028. The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of December 31, 2022:September 30, 2023:
For the fiscal year ended: | Amount | |||||
FY 2024 | March 31, 2024 | $ | 80,154 | |||
FY 2025 | March 31, 2025 | 106,872 | ||||
FY 2026 | March 31, 2026 | 106,872 | ||||
FY 2027 | March 31, 2027 | 106,872 | ||||
FY 2028 | March 31, 2028 | 106,872 | ||||
FY 2029 | March 31, 2029 | ends June 30, 2028 | 26,718 | |||
| 534,360 | ||||||
Less: Amount attributable to imputed interest | (60,458 | ) | ||||
| $ | 473,902 | |||||
Weighted average remaining lease term (in years) | 3.0 | |||||
Weighted average discount rate | 5 | % | ||||
For the fiscal year ended:
| Amount
| |||||
FY 2024 | March 31, 2024 | $ | 53,436 | |||
FY 2025 | March 31, 2025 | 106,872 | ||||
FY 2026 | March 31, 2026 | 106,872 | ||||
FY 2027 | March 31, 2027 | 106,872 | ||||
FY 2028 | March 31, 2028 | 106,872 | ||||
FY 2029 | March 31, 2029 | ends June 30, 2028 | 26,718 | |||
| 507,642 | ||||||
Less: Amount attributable to imputed interest | (54,733 | ) | ||||
| $ | 452,909 | |||||
| Weighted average remaining lease term (in years) | 2.9 | |||||
| Weighted average discount rate | 5 | % | ||||
Rent and real estate tax expense for all facilities for the three and six months ended JuneSeptember 30, 2023 was approximately $34,000.$35,000 and $69,000, respectively.
Rent and real estate tax expense for all facilities for the three and six months ended JuneSeptember 30, 2022 was approximately $34,000.was approximately $34,000 and $68,000, respectively.
These are reported as a component of cost of sales and selling, general and administrative expenses in the accompanying consolidated statements of operations.
NOTE 9 – PAYCHECK PROTECTION PROGRAM (PPP) LOAN
In May 2020, the Company obtained funding through the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) of $381,000. In February 2021, a second PPP loan was obtained in the amount of $332,542, for a total of $713,542. The loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities, with at least 60% being used for payroll. The Company did use the funds for these expenses during the year ended March 31, 2021. The Company applied for loan forgiveness of both PPP loans. On September 7, 2021, the Company received approval from the SBA for $361,275 of PPP loan forgiveness. On December 21, 2021, the Company received approval from the Bank for $332,542. This amount was recorded as Forgiveness of Paycheck Protection loan in the accompanying condensed Consolidated Statements of Operations during the fiscal year ended March 31, 2022.
The unforgiven portion of the first PPP loan is $19,725, which was converted to a term loan payable in equal installments of principal plus interest at 1% with a maturity date of May 15, 2025. No collateral or personal guarantees is required for the loan. At JuneSeptember 30, 2023, the outstanding balance is $10,311.$8,966.
NOTE 10 – WARRANTS
On April 11, 2023, warrants to purchase Company stock were issued to two outside consultants. Each consultant was granted 100,000 warrants with a strike price of $0.20. The Warrants vested and were exercisable immediately. The warrants were valued using a Black Scholes model effective April 11, 2023, cumulative volatility was computed at 123.52% and the total valuation was $8,256 which will be amortized over the 24 month24-month life.
Outstanding and exercisable | |||||||||||||||||||
Weighted- | Weighted- | ||||||||||||||||||
Range of | average | average | |||||||||||||||||
exercise | Number | remaining life | exercise | Number | |||||||||||||||
prices | outstanding | in years | price | exercisable | |||||||||||||||
| $ | 0.20 | 200,000 | 1.78 | $ | 0.20 | 200,000 | See below | ||||||||||||
| 200,000 | 1.79 | $ | 0.20 | 200,000 | |||||||||||||||
Outstanding and exercisable | |||||||||||||||||||
Weighted- | Weighted- | ||||||||||||||||||
Range of | average | average | |||||||||||||||||
exercise | Number | remaining life | exercise | Number | |||||||||||||||
prices | outstanding | in years | price | exercisable | |||||||||||||||
| $ | 0.20 | 200,000 | 1.78 | $ | 0.20 | 200,000 | See below | ||||||||||||
2023 | 2022 | |||||||||||||||
# of Shares | Weighted | # of Shares | Weighted | |||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Price | Price | |||||||||||||||
Outstanding, beginning of year | - | $ | - | - | $ | - | ||||||||||
Issued | 200,000 | 0.20 | - | - | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Expired | - | - | - | - | ||||||||||||
Cancelled | - | - | - | - | ||||||||||||
Outstanding, end of period | 200,000 | $ | 0.20 | - | $ | - | ||||||||||
Exercisable, end of period | 200,000 | $ | 0.20 | - | $ | - | ||||||||||
NOTE 11 – 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 15, 2024, renewing automatically every year. The Company is required to make monthly interest payments, at a rate of 8.87% as of JuneSeptember 30, 2023. Any unpaid principal will be due upon maturity. At JuneSeptember 30, 2023 and March 31, 2023, the outstanding balance was $215,116$297,339 and $112,809, respectively.
NOTE 12 – DUE TO STOCKHOLDER
The Company’s President and a stockholder 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. As of JuneSeptember 30, 2023 and March 31, 2023, the amount due was $6,409$0.00 and $13,626, respectively.
NOTE 13 – LEGAL PROCEEDINGS
We are involved, from time to time, in litigation and proceedings arising out of the ordinary course of business. There are no pending material legal proceedings or environmental investigations to which we are a party or to which our property is subject.
NOTE 14 – CONTRACTURALCONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
Legal Contingencies
We are involved, from time to time, in litigation and proceedings arising out of the ordinary course of business. There are no pending material legal proceedings or environmental investigations to which we are a party or to which our property is subject.
Product Liability
As of JuneSeptember 30, 2023 and March 31, 2023, there were no claims against us for product liability.
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, 2022.
BUSINESS OVERVIEW
The Company is a technology-based developer and manufacturer of diversified lines of products and derives revenue 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 Company has increased internal research and development by utilizing their engineering resources to advance their own proprietary medical device technologies.
The Company is a corporation that was organized under the laws of the State of Delaware on November 24, 1969. Our operations are conducted through ADM and its subsidiary Sonotron.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNESEPTEMBER 30, 2023 AS COMPARED TO JUNESEPTEMBER 30, 2022.
For the three months ended June 30, 2023 | ||||||||||||||||
Chemical | Electronics | Engineering | Total | |||||||||||||
Revenue | $ | 338,005 | $ | 266,163 | $ | 158,521 | $ | 762,689 | ||||||||
Cost of Sales | 214,101 | 177,843 | 45,603 | 437,547 | ||||||||||||
Gross Profit | 123,904 | 88,320 | 112,918 | 325,142 | ||||||||||||
Gross Profit Percentage | 37 | % | 33 | % | 71 | % | 43 | % | ||||||||
Operating Expenses | 203,692 | 162,029 | 97,217 | 462,938 | ||||||||||||
Operating Income (Loss) | (79,788 | ) | (73,709 | ) | 15,701 | (137,796 | ) | |||||||||
Other income (expenses) | 2,435 | 1,937 | 1,163 | 5,535 | ||||||||||||
Income (loss) before provision from income taxes | $ | (77,353 | ) | $ | (71,772 | ) | $ | 16,864 | $ | (132,261 | ) | |||||
For the three months ended June 30, 2022 | ||||||||||||||||||||||||||||||||
For the three months ended September 30, 2023 | For the three months ended September 30, 2023 | |||||||||||||||||||||||||||||||
Chemical | Electronics | Engineering | Total | Chemical | Electronics | Engineering | Total | |||||||||||||||||||||||||
Revenue | $ | 372,175 | $ | 464,692 | $ | 84,541 | $ | 921,408 | $ | 282,910 | $ | 392,878 | $ | 78,344 | $ | 754,132 | ||||||||||||||||
Cost of Sales | 189,532 | 322,505 | 26,312 | 538,349 | 234,508 | 253,444 | 60,028 | 547,980 | ||||||||||||||||||||||||
Gross Profit | 182,643 | 142,187 | 58,229 | 383,059 | 48,402 | 139,434 | 18,316 | 206,152 | ||||||||||||||||||||||||
Gross Profit Percentage | 49 | % | 31 | % | 69 | % | 42 | % | 17 | % | 35 | % | 23 | % | 27 | % | ||||||||||||||||
Operating Expenses | 171,250 | 208,842 | 37,592 | 417,684 | 163,969 | 241,504 | 28,329 | 433,802 | ||||||||||||||||||||||||
Operating Income (Loss) | 11,393 | (66,655 | ) | 20,637 | (34,625 | ) | (115,567 | ) | (102,070 | ) | (10,013 | ) | (227,650 | ) | ||||||||||||||||||
Other income (expenses) | (1,657 | ) | (2,021 | ) | (363 | ) | (4,041 | ) | (302 | ) | 299 | (452 | ) | (455 | ) | |||||||||||||||||
Income (loss) before provision from income taxes | $ | 9,736 | $ | (68,676 | ) | $ | 20,274 | $ | (38,666 | ) | ||||||||||||||||||||||
Income (loss) before benefit from income taxes | $ | (115,869 | ) | $ | (101,771 | ) | $ | (10,465 | ) | $ | (228,105 | ) | ||||||||||||||||||||
Variance | ||||||||||||||||||||||||||||||||
For the three months ended September 30, 2022 | For the three months ended September 30, 2022 | |||||||||||||||||||||||||||||||
Chemical | Electronics | Engineering | Total | Chemical | Electronics | Engineering | Total | |||||||||||||||||||||||||
Revenue | $ | (34,170 | ) | $ | (198,529 | ) | $ | 73,980 | $ | (158,719 | ) | $ | 345,395 | $ | 633,857 | $ | 161,016 | $ | 1,140,268 | |||||||||||||
Cost of Sales | 24,569 | (144,662 | ) | 19,291 | (100,802 | ) | 210,139 | 336,875 | 35,221 | 582,235 | ||||||||||||||||||||||
Gross Profit | (58,739 | ) | (53,867 | ) | 54,689 | (57,917 | ) | 135,256 | 296,982 | 125,795 | 558,033 | |||||||||||||||||||||
Gross Profit Percentage | -12 | % | 3 | % | 2 | % | 1 | % | 39 | % | 47 | % | 78 | % | 49 | % | ||||||||||||||||
Operating Expenses | 32,442 | (46,813 | ) | 59,625 | 45,254 | 134,238 | 253,756 | 67,147 | 455,141 | |||||||||||||||||||||||
Operating Income (Loss) | (91,181 | ) | (7,054 | ) | (4,936 | ) | (103,171 | ) | 1,018 | 43,226 | 58,648 | 102,892 | ||||||||||||||||||||
Other income (expenses) | 4,092 | 3,958 | 1,526 | 9,576 | (754 | ) | (1,631 | ) | (464 | ) | (2,849 | ) | ||||||||||||||||||||
Income (loss) before benefit from income taxes | $ | (87,089 | ) | $ | (3,096 | ) | $ | (3,410 | ) | $ | (93,595 | ) | $ | 264 | $ | 41,595 | $ | 58,184 | $ | 100,043 | ||||||||||||
Variance | ||||||||||||||||
Chemical | Electronics | Engineering | Total | |||||||||||||
Revenue | $ | (62,485 | ) | $ | (240,979 | ) | $ | (82,672 | ) | $ | (386,136 | ) | ||||
Cost of Sales | 24,369 | (83,431 | ) | 24,807 | (34,255 | ) | ||||||||||
Gross Profit | (86,854 | ) | (157,548 | ) | (107,479 | ) | (351,881 | ) | ||||||||
Gross Profit Percentage | -22 | % | -11 | % | -55 | % | -22 | % | ||||||||
Operating Expenses | 29,731 | (12,252 | ) | (38,818 | ) | (21,339 | ) | |||||||||
Operating Income (Loss) | (116,585 | ) | (145,296 | ) | (68,661 | ) | (330,542 | ) | ||||||||
Other income (expenses) | 452 | 1,930 | 12 | 2,394 | ||||||||||||
Income (loss) before benefit from income taxes | $ | (116,133 | ) | $ | (143,366 | ) | $ | (68,649 | ) | $ | (328,148 | ) | ||||
For the six months ended September 30, 2023 | ||||||||||||||||
Chemical | Electronics | Engineering | Total | |||||||||||||
Revenue | $ | 620,915 | $ | 659,041 | $ | 236,865 | $ | 1,516,821 | ||||||||
Cost of Sales | 448,609 | 431,287 | 105,631 | 985,527 | ||||||||||||
Gross Profit | 172,306 | 227,754 | 131,234 | 531,294 | ||||||||||||
Gross Profit Percentage | 28 | % | 35 | % | 55 | % | 35 | % | ||||||||
Operating Expenses | 367,661 | 403,533 | 125,546 | 896,740 | ||||||||||||
Operating Income (Loss) | (195,355 | ) | (175,779 | ) | 5,688 | (365,446 | ) | |||||||||
Other income (expenses) | 2,133 | 2,236 | 711 | 5,080 | ||||||||||||
Income before provision for income taxes | $ | (193,222 | ) | $ | (173,543 | ) | $ | 6,399 | $ | (360,366 | ) | |||||
For the six months ended September 30, 2022 | ||||||||||||||||
Chemical | Electronics | Engineering | Total | |||||||||||||
Revenue | $ | 717,570 | $ | 1,098,549 | $ | 245,557 | $ | 2,061,676 | ||||||||
Cost of Sales | 399,671 | 659,380 | 61,533 | 1,120,584 | ||||||||||||
Gross Profit | 317,899 | 439,169 | 184,024 | 941,092 | ||||||||||||
Gross Profit Percentage | 44 | % | 40 | % | 75 | % | 46 | % | ||||||||
Operating Expenses | 305,488 | 462,598 | 104,739 | 872,825 | ||||||||||||
Operating Income (Loss) | 12,411 | (23,429 | ) | 79,285 | 68,267 | |||||||||||
Other income (expenses) | (2,411 | ) | (3,652 | ) | (827 | ) | (6,890 | ) | ||||||||
Income before provision for income taxes | $ | 10,000 | $ | (27,081 | ) | $ | 78,458 | $ | 61,377 | |||||||
Variance | ||||||||||||||||
Chemical | Electronics | Engineering | Total | |||||||||||||
Revenue | $ | (96,655 | ) | $ | (439,508 | ) | $ | (8,692 | ) | $ | (544,855 | ) | ||||
Cost of Sales | 48,938 | (228,093 | ) | 44,098 | (135,057 | ) | ||||||||||
Gross Profit | (145,593 | ) | (211,415 | ) | (52,790 | ) | (409,798 | ) | ||||||||
Gross Profit Percentage | -17 | % | -5 | % | -20 | % | -11 | % | ||||||||
Operating Expenses | 62,173 | (59,065 | ) | 20,807 | 23,915 | |||||||||||
Operating Income (Loss) | (207,766 | ) | (152,350 | ) | (73,597 | ) | (433,713 | ) | ||||||||
Other income (expenses) | 4,544 | 5,888 | 1,538 | 11,970 | ||||||||||||
Income (loss) before benefit from income taxes | $ | (203,222 | ) | $ | (146,462 | ) | $ | (72,059 | ) | $ | (421,743 | ) | ||||
Revenues for the three months ended JuneSeptember 30, 2023 decreased by $158,719.$386,136. The decrease is a result of decreased sales of $34,170$62,485 in the Chemical segment, $198,529$240,979 in the Electronics segment offsetand $82,672 in the Engineering segment.
Revenues for the six months ended September 30, 2023 decreased by an increase$544,855. The decrease is a result of $73,980decreased sales of $96,655 in the Chemical segment, $439,508 in the Electronics segment and $8,692 in the Engineering segment.
Gross profit for the three and six months ended JuneSeptember 30, 2023 decreased by $57,917.$351,881 and $409,798, respectively. The decrease in gross profit resulted primarily from decreased sales in all segments, Chemical, Electronics and Electronics segments.
We are highly dependent upon certain customers. During the three months ended June 30, 2023, two customers accounted for 40% of our net revenue. Net revenues from foreign customers for the three months ended June 30, 2023 was $119,034 or 16%.Engineering.
During the three months ended JuneSeptember 30, 2022, four2023, two customers accounted for 82%48% of our net revenue. Net revenues from foreign customers forDuring the three months ended JuneSeptember 30, 2022, was $125,275 or 14%.three customers accounted for 65% of net revenue.
During the six months ended September 30, 2023, two customers accounted for 42% of our net revenue. During the three months ended September 30, 2022, two customers accounted for 50% of net 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.
Loss from operations for the three months ended JuneSeptember 30, 2023 was $137,796$227,650 compared to lossincome from operations for the three months ended JuneSeptember 30, 2022 of $34,625.$102,892.
Loss from operations for the six months ended September 30, 2023 was $365,446 compared to income from operations for the six months ended September 30, 2022 of $68,267.
Other income increased $9,576$2,394 for the three months ended JuneSeptember 30, 2023. The increase is mainly attributable to an increase in interest income.
Other income increased $11,970 for the six months ended September 30, 2023. The increase is mainly attributable to an increase in interest income.
The foregoing resulted in net loss before provision for taxes for the three and six months ended JuneSeptember 30, 2023 of $132,261. $228,105 and $360,366.
Loss per share were ($0.00) and ($0.01) for the three and six months ended JuneSeptember 30, 2023.
LIQUIDITY AND CAPITAL RESOURCES
At JuneSeptember 30, 2023, we had cash and cash equivalents of $844,731$716,323 as compared to $1,003,730 at March 31, 2023. The $158,999$287,407 decrease was primarily the result of cash used in operations during the three-monthsix-month period in the amount of $252,744$453,602 and cash provided in financing activities of $93,745.$166,193. Our cash will continue to be used for increased marketing costs, and increased production labor costs all in an attempt to increase our revenue, as well as increased expenditures for our internal R&D. We expect to have enough cash to fund operations for the next twelve months.
Below is a summary of our cash flow for the three-month ending periods indicated:
June 30, 2023 | June 30, 2022 | |||||||
Net cash provided by (used in) operating activities | $ | (252,744 | ) | $ | (164,222 | ) | ||
Net cash provided by (used in) investing activities | - | - | ||||||
Cash flows provided (used) in financing activities: | 93,745 | 13,270 | ||||||
Net increase (decrease) in cash and cash equivalents | (158,999 | ) | (150,952 | ) | ||||
Cash and cash equivalents - beginning of period | 1,003,730 | 1,038,498 | ||||||
Cash and cash equivalents - end of period | 844,731 | 887,546 | ||||||
September 30, 2023 | September 30, 2022 | |||||||
Net cash used in operating activities | $ | (453,602 | ) | $ | (63,889 | ) | ||
Cash flows provided (used) in financing activities: | 166,195 | (120,116 | ) | |||||
Net (decrease) in cash and cash equivalents | (287,407 | ) | (184,005 | ) | ||||
Cash and cash equivalents - beginning of period | 1,003,730 | 1,038,498 | ||||||
Cash and cash equivalents - end of period | 716,323 | 854,493 | ||||||
Future Sources of Liquidity:
We expect that growth with profitable customers and continued focus on new customers will enable us to generate cash flows from operating activities during fiscal 2024.
Based on current expectations, we believe that our existing cash and cash equivalents of $844,731$716,323 as of JuneSeptember 30, 2023, 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 used by operating activities was $252,744$453,523 for the threesix months ended JuneSeptember 30, 2023, as compared to net cash used by operating activities of $164,222$63,889 for the threesix months ended JuneSeptember 30, 2022. The cash used during the threesix months ended JuneSeptember 30, 2023 was primarily due to a decrease in net operating assets of $181,353$35,236 combined with a decrease in net operating liabilities of $22,096,$167,324, net loss of $132,261offset$360,366 offset by write-off of inventories of $19,404,$28,710, amortization of $20,834,$41,922, and stock based compensation of $1,032$2,064 and non-cash interest expense of $20,113$11,706, and .
INVESTING ACTIVITIES
No cash was provided for or used in investing activities for the threesix months ended JuneSeptember 30, 2023.
FINANCING ACTIVITIES
For the threesix months ended JuneSeptember 30,2023, net cash provided by financing activities was $93,745$166,116 due to a net borrowing and payments in the line of credit of $102,307,$184,530, a decrease in due to stockholder of $7,217$15,724 and repayments on the PPP loan of $1,345.$2,690.
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 and accounts receivable.
Cash and cash equivalents – For financial statement purposes, the Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less at inception. The Company deposits cash and cash equivalents with high credit quality financial institutions and believes that any amounts in excess of insurance limitations to be at minimal risk. Cash and cash equivalents held at these accounts are currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000. At JuneSeptember 30, 2023, approximately $638,000$604,000 exceeded the FDIC limit.
Our sales are materially dependent on a small group of customers, as noted in Note 6 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 and year to date period ended December 31, 2022,September 30, 2023, 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, 2023, is a result of:
a. Deficiencies in Internal Control Structure Environment. 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 present fairly, in all material respects, the Company’s condensed consolidated balance sheets as of JuneSeptember 30, 2023, and March 31, 2023 and the related condensed consolidated statements of operations, and cash flows for the three and six months ended JuneSeptember 30, 2023 and 2022, 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, 2023.
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
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS.
(a) Exhibit No.
21.1 | |
31.1 |
32.1 |
101.INS** | Inline XBRL Instance |
101.SCH** | Inline XBRL Taxonomy Extension Schema |
101.CAL** | Inline XBRL Taxonomy Extension Calculation |
101.DEF** | Inline XBRL Taxonomy Extension Definition |
101.LAB** | Inline XBRL Taxonomy Extension Labels |
101.PRE** | Inline XBRL Taxonomy Extension Presentation |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
** 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 |
|