Adm Tronics Unlimited, Inc 10-Q for FY2024 Q1
Adm Tronics Unlimited, Inc. (ADMT)
About this 10-Q
Adm Tronics Unlimited, Inc filed this 10-Q on August 14, 2023, covering the quarter ended June 30, 2023 (FY2024 Q1).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $762.69K
- down 17.2% from $921.41K a year earlier
- Net loss
- $132.26K
- compared with a net loss of $38.67K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _____ to
COMMISSION FILE NO.
(Exact name of registrant as specified in its charter)
|
(State or Other Jurisdiction of Incorporation or or organization) |
(I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (
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:
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).
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 ☐ |
|
|
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
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
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
INDEX
|
Page Number |
||
|
Part I - Financial Information |
||
|
Item 1. |
Condensed Consolidated Financial Statements (unaudited): |
|
|
Condensed Consolidated Balance Sheets –June 30, 2023 (unaudited) and March 31, 2023 |
3 |
|
|
Condensed Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022 (unaudited) |
4 |
|
|
Condensed Consolidated Statement of Stockholders’ Equity for the three months ended June 30, 2023 and 2022 (unaudited) |
5 |
|
|
Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022 (unaudited) |
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 |
18 |
|
Item 4. |
Controls and Procedures |
18 |
|
Part II - Other Information |
||
|
Item 1. |
Legal Proceedings |
18 |
|
Item 1A. |
Risk Factors |
19 |
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
19 |
|
Item 3. |
Defaults Upon Senior Securities |
19 |
|
Item 4. |
Mine Safety Disclosures |
19 |
|
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, |
|||||||
|
2023 |
2023 | |||||||
|
(Unaudited) |
||||||||
|
ASSETS |
||||||||
| Current assets: | ||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Accounts receivable, net of allowance for doubtful accounts of $ |
||||||||
|
Inventories |
||||||||
|
Prepaid expenses and other current assets |
||||||||
| Total current assets | ||||||||
|
Other Assets: |
||||||||
|
Property and equipment, net of accumulated depreciation of $ |
||||||||
| Long-term inventory | ||||||||
|
Operating lease right-of-use asset |
||||||||
|
Loan receivable |
||||||||
|
Due from affiliate |
||||||||
|
Intangible assets, net of accumulated amortization of $ |
||||||||
|
Other assets |
||||||||
|
Total other assets |
||||||||
|
Total assets |
$ | $ | ||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: | ||||||||
|
Accounts payable |
$ | $ | ||||||
| Bank overdraft | ||||||||
|
Accrued expenses and other current liabilities |
||||||||
|
PPP loan |
||||||||
|
Line of credit |
||||||||
|
Operating lease liability |
||||||||
|
Customer deposits |
||||||||
|
Due to stockholder |
||||||||
|
Total current liabilities |
||||||||
| Long-term liabilities | ||||||||
|
Operating lease liability less current portion |
||||||||
|
Total long-term liabilities |
||||||||
|
Total liabilities |
||||||||
| Stockholders' equity: | ||||||||
|
Preferred stock, $ par value; |
||||||||
|
Common stock, $ |
||||||||
|
Additional paid-in capital |
||||||||
|
Accumulated deficit |
( |
) | ( |
) | ||||
|
Total stockholders' equity |
||||||||
|
Total liabilities and stockholders' equity |
$ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements
|
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY |
|||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||
|
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022 |
|||||
|
(Unaudited) |
|
2023 |
2022 |
|||||||
|
Net revenues |
$ | $ | ||||||
|
Cost of sales |
||||||||
|
Gross Profit |
||||||||
| Operating expenses: | ||||||||
|
Research and development |
||||||||
|
Selling, general and administrative |
||||||||
|
Total operating expenses |
||||||||
| Loss from operations | ( |
) | ( |
) | ||||
|
Other income (expense): |
||||||||
|
Interest income |
||||||||
|
Interest and finance expenses |
( |
) | ( |
) | ||||
|
Total other income (expense) |
( |
) | ||||||
| Loss before provision for taxes | ( |
) | ( |
) | ||||
|
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
Basic and diluted loss per common share: |
$ | ( |
) | $ | ( |
) | ||
|
Weighted average shares of common stock outstanding - basic and diluted |
||||||||
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 THREE MONTHS ENDED JUNE 30, 2023 AND 2022
|
Common Stock |
Common Stock |
Additional Paid-in |
Accumulated |
|||||||||||||||||
|
Shares |
Amount |
Capital |
Deficit |
Total |
||||||||||||||||
|
Balance at April 1, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
|
Stock based compensation |
||||||||||||||||||||
|
Net (loss) |
$ | ( |
) | $ | ( |
) | ||||||||||||||
|
Balance at June 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
|
Balance at April 1, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
|
Stock based compensation |
1,032 | |||||||||||||||||||
|
Net income (loss) |
( |
) | ( |
) | ||||||||||||||||
|
Balance at June 30, 2023 |
$ | $ | $ | ( |
) | |||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
|
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY |
||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
|
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022 |
||||
|
(Unaudited) |
|
2023 |
2022 |
|||||||
| Cash flows from operating activities: | ||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
|
Amortization |
||||||||
|
Write-off of inventories |
||||||||
|
Bad debt |
||||||||
|
Non-cash interest expense |
||||||||
|
Amortization of right-to-use asset |
||||||||
|
Stock based compensation |
||||||||
|
Changes in operating assets and liabilities balances: |
||||||||
|
Accounts receivable |
( |
) | ( |
) | ||||
| Inventories | ( |
) | ( |
) | ||||
|
Prepaid expenses and other current assets |
( |
) | ||||||
|
Loan receivable |
( |
) | ||||||
|
Accounts payable |
( |
) | ||||||
|
Bank overdraft |
||||||||
|
Customer deposits |
( |
) | ( |
) | ||||
|
Accrued expenses and other current liabilities |
( |
) | ||||||
| Payments of operating lease liability | ( |
) | ( |
) | ||||
|
Net cash (used in) operating activities |
( |
) | ( |
) | ||||
|
Cash flows provided in financing activities: |
||||||||
|
Due to shareholder |
( |
) | ( |
) | ||||
|
Proceeds from line of credit |
||||||||
| Repayments of line of credit | ( |
) | ( |
) | ||||
|
Payments to PPP loan |
( |
) | ( |
) | ||||
|
Net cash provided by financing activities |
||||||||
|
Net (decrease) in cash and cash equivalents |
( |
) | ( |
) | ||||
|
Cash and cash equivalents - beginning of period |
||||||||
|
Cash and cash equivalents - end of period |
$ | $ | ||||||
|
Cash paid for: |
||||||||
|
Interest |
$ | $ | ||||||
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 MONTHS ENDED JUNE 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 on November 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-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 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-K for that year. Unaudited interim results are not necessarily indicative of the results for the full fiscal year ending March 31, 2023. The consolidated balance sheet as of March 31, 2022 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. At June 30, 2023 and March 31, 2023, approximately $
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 $
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 method) and net realizable value. Inventories that are expected to be sold within one operating cycle (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 to years, the estimated useful lives of the property and equipment. As of June 30, 2023, all fixed assets were fully depreciated.
ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to $
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 anti-dilutive instruments in force during the periods ended June 30, 2023 and 2022, respectively.
Per share basic and diluted (loss) amounted to $ and $ for the three months ended June 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 |
$ | $ | $ | |||||||||
|
Finished goods |
||||||||||||
|
Totals |
$ | $ | $ | |||||||||
|
Inventories at March 31, 2023 consisted of the following: |
||||||||||||
|
Current |
Long Term |
Total |
||||||||||
|
Raw materials |
$ | $ | $ | |||||||||
|
Finished goods |
||||||||||||
|
Totals |
$ | $ | $ | |||||||||
NOTE 4 - INTANGIBLE ASSETS
Intangible assets are being amortized using the straight-line method over periods ranging from
|
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 |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||
|
Estimated aggregate future amortization expense related to intangible assets is as follows: |
||||||||||
|
For the fiscal years ended March 31, |
||||
|
2024 |
||||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Thereafter |
||||
NOTE 5 – CONCENTRATIONS
During the three months ended June 30, 2023, customers accounted for
As of June 30, 2023, customers represented
As of June 30, 2023, vendors accounted for over
The Company’s customer base is comprised of foreign and domestic entities with diverse demographics. Net revenues from foreign customers for the three months ended June 30, 2023 were $
Net revenues from foreign customers for the three months ended June 30, 2022 were $
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, |
||||||||
|
2023 |
2022 |
|||||||
| Net Revenue in the US | ||||||||
|
Chemical |
$ | $ | ||||||
|
Electronics |
||||||||
|
Engineering |
||||||||
| Net Revenue outside the US | ||||||||
|
Chemical |
||||||||
|
Electronics |
||||||||
|
Engineering |
||||||||
|
Total Revenues |
$ | $ | ||||||
|
Information about segments is as follows: |
|||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Three months ended June 30, 2023 |
||||||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Segment operating income |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
|
Three months ended June 30, 2022 |
||||||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Segment operating income |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
|
Total assets at June 30, 2023 |
$ | $ | $ | $ | ||||||||||||
|
Total assets at March 31, 2023 |
$ | $ | $ | $ | ||||||||||||
NOTE 7 – DUE FROM AFFILIATE
The Company has a $
The Company provided $
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:
|
For the fiscal year ended: |
Amount |
|||||
|
FY 2024 |
March 31, 2024 |
$ | ||||
|
FY 2025 |
March 31, 2025 |
|||||
|
FY 2026 |
March 31, 2026 |
|||||
|
FY 2027 |
March 31, 2027 |
|||||
|
FY 2028 |
March 31, 2028 |
|||||
|
FY 2029 |
March 31, 2029 |
ends June 30, 2028 |
||||
|
Less: Amount attributable to imputed interest |
( |
) | ||||
| $ | ||||||
|
Weighted average remaining lease term (in years) |
||||||
|
Weighted average discount rate |
% | |||||
Rent and real estate tax expense for all facilities for the three months ended June 30, 2023 was approximately $
Rent and real estate tax expense for all facilities for the three months ended June 30, 2022 was approximately $
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 $
The unforgiven portion of the first PPP loan is $
NOTE 10 – WARRANTS
On April 11, 2023, warrants to purchase Company stock were issued to two outside consultants. Each consultant was granted
|
Outstanding and exercisable |
|||||||||||||||||||
|
Weighted- |
Weighted- |
||||||||||||||||||
|
Range of |
average |
average |
|||||||||||||||||
|
exercise |
Number |
remaining life |
exercise |
Number |
|||||||||||||||
|
prices |
outstanding |
in years |
price |
exercisable |
|||||||||||||||
| $ | $ |
See below |
|||||||||||||||||
| $ | |||||||||||||||||||
|
2023 |
2022 |
|||||||||||||||
|
# of Shares |
Weighted |
# of Shares |
Weighted |
|||||||||||||
|
Average |
Average |
|||||||||||||||
|
Exercise |
Exercise |
|||||||||||||||
|
Price |
Price |
|||||||||||||||
|
Outstanding, beginning of year |
$ | $ | ||||||||||||||
|
Issued |
||||||||||||||||
|
Exercised |
||||||||||||||||
|
Expired |
||||||||||||||||
|
Cancelled |
||||||||||||||||
|
Outstanding, end of period |
$ | $ | ||||||||||||||
|
Exercisable, end of period |
$ | $ | ||||||||||||||
NOTE 11 – LINE OF CREDIT
On June 15, 2018, the Company obtained an unsecured revolving line of credit, with a limit of $
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 repayment terms or interest accruing on this liability. As of June 30, 2023 and March 31, 2023, the amount due was $
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 – CONTRACTURAL 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 June 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 MONTHS ENDED JUNE 30, 2023 AS COMPARED TO JUNE 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 |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 372,175 | $ | 464,692 | $ | 84,541 | $ | 921,408 | ||||||||
|
Cost of Sales |
189,532 | 322,505 | 26,312 | 538,349 | ||||||||||||
|
Gross Profit |
182,643 | 142,187 | 58,229 | 383,059 | ||||||||||||
|
Gross Profit Percentage |
49 | % | 31 | % | 69 | % | 42 | % | ||||||||
|
Operating Expenses |
171,250 | 208,842 | 37,592 | 417,684 | ||||||||||||
|
Operating Income (Loss) |
11,393 | (66,655 | ) | 20,637 | (34,625 | ) | ||||||||||
|
Other income (expenses) |
(1,657 | ) | (2,021 | ) | (363 | ) | (4,041 | ) | ||||||||
|
Income (loss) before provision from income taxes |
$ | 9,736 | $ | (68,676 | ) | $ | 20,274 | $ | (38,666 | ) | ||||||
|
Variance |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | (34,170 | ) | $ | (198,529 | ) | $ | 73,980 | $ | (158,719 | ) | |||||
|
Cost of Sales |
24,569 | (144,662 | ) | 19,291 | (100,802 | ) | ||||||||||
|
Gross Profit |
(58,739 | ) | (53,867 | ) | 54,689 | (57,917 | ) | |||||||||
|
Gross Profit Percentage |
-12 | % | 3 | % | 2 | % | 1 | % | ||||||||
|
Operating Expenses |
32,442 | (46,813 | ) | 59,625 | 45,254 | |||||||||||
|
Operating Income (Loss) |
(91,181 | ) | (7,054 | ) | (4,936 | ) | (103,171 | ) | ||||||||
|
Other income (expenses) |
4,092 | 3,958 | 1,526 | 9,576 | ||||||||||||
|
Income (loss) before benefit from income taxes |
$ | (87,089 | ) | $ | (3,096 | ) | $ | (3,410 | ) | $ | (93,595 | ) | ||||
Revenues for the three months ended June 30, 2023 decreased by $158,719. The decrease is a result of decreased sales of $34,170 in the Chemical segment, $198,529 in the Electronics segment offset by an increase of $73,980 in the Engineering segment.
Gross profit for the three months ended June 30, 2023 decreased by $57,917. The decrease in gross profit resulted primarily from decreased sales in Chemical 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%.
During the three months ended June 30, 2022, four customers accounted for 82% of our net revenue. Net revenues from foreign customers for the three months ended June 30, 2022 was $125,275 or 14%.
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 June 30, 2023 was $137,796 compared to loss from operations for the three months ended June 30, 2022 of $34,625.
Other income increased $9,576 for the three months ended June 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 months ended June 30, 2023 of $132,261. Loss per share were ($0.00) for the three months ended June 30, 2023.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2023, we had cash and cash equivalents of $844,731 as compared to $1,003,730 at March 31, 2023. The $158,999 decrease was primarily the result of cash used in operations during the three-month period in the amount of $252,744 and cash provided in financing activities of $93,745. 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 | ||||||
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 as of June 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 for the three months ended June 30, 2023, as compared to net cash used by operating activities of $164,222 for the three months ended June 30, 2022. The cash used during the three months ended June 30, 2023 was primarily due to a decrease in net operating assets of $181,353 combined with a decrease in net operating liabilities of $22,096, net loss of $132,261offset by write-off of inventories of $19,404, amortization of $20,834, and stock based compensation of $1,032 and non-cash interest expense of $20,113
INVESTING ACTIVITIES
No cash was provided for or used in investing activities for the three months ended June 30, 2023.
FINANCING ACTIVITIES
For the three months ended June 30,2023, net cash provided by financing activities was $93,745 due to a net borrowing and payments in the line of credit of $102,307, a decrease in due to stockholder of $7,217 and repayments on the PPP loan of $1,345.
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 June 30, 2023, approximately $638,000 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, 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 June 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 June 30, 2023, and March 31, 2023 and the related condensed consolidated statements of operations, and cash flows for the three months ended June 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 |
|
August 14, 2023 |
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 AND
SECURITIES AND EXCHANGE COMMISSION RELEASE 34-46427
I, Andre' DiMino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ADM Tronics Unlimited, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am the registrant's only certifying officer and am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: August 14, 2023 |
/s/ Andre' DiMino |
||
|
Andre' DiMino |
|||
|
Chief Executive Officer and Chief Financial Officer |
A signed original of this written statement required by Section 302 has been provided to ADM Tronics Unlimited, Inc. and will be retained by ADM Tronics Unlimited, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual Report of ADM Tronics Unlimited, Inc. (the "Company") on Form 10-Q for the three months ended June 30, 2023, (the "Report"), filed with the Securities and Exchange Commission, Andre' DiMino, Chief Executive Officer and Chief Financial Officer, of the Company hereby certifies pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the result of operations of the Company for the periods presented.
|
Date: August 14, 2023 |
/s/ Andre' DiMino |
||
|
Chief Executive Officer and |
|||
|
Chief Financial Officer |
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ADM Tronics Unlimited, Inc. and will be retained by ADM Tronics Unlimited, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.