ADMT 10-Q
Adm Tronics Unlimited, Inc. (ADMT)
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)
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(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:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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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.
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Smaller reporting company |
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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
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Page Number |
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Part I - Financial Information |
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Item 1. |
Condensed Consolidated Financial Statements (unaudited): |
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Condensed Consolidated Balance Sheets –December 31, 2022 (unaudited) and March 31, 2022 |
3 |
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Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2022 and 2021 (unaudited) |
4 |
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Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended December 31, 2022 and 2021 (unaudited) |
5 |
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Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2022 and 2021 (unaudited) |
6 |
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Notes to Condensed Consolidated Financial Statements |
7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
18 |
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Item 4. |
Controls and Procedures |
18 |
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Part II - Other Information |
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Item 1. |
Legal Proceedings |
18 |
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Item 1A. |
Risk Factors |
19 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
19 |
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Item 3. |
Defaults Upon Senior Securities |
19 |
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Item 4. |
Mine Safety Disclosures |
19 |
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Item 5. |
Other Information |
19 |
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Item 6. |
Exhibits |
19 |
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
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December 31, |
March 31, |
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2022 Unaudited |
2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
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Cash and cash equivalents |
$ | $ | ||||||
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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| Other Assets: | ||||||||
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Operating lease right-of-use asset |
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Loan receivable |
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Due from affiliate |
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Inventories - long-term portion |
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Intangible assets, net of accumulated amortization of $ |
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Other assets |
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Deferred tax asset |
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Total other assets |
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Total assets |
$ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
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Accounts payable |
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Accrued expenses and other current liabilities |
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PPP loan |
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Line of credit |
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Warrant liability |
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Operating lease liability |
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Customer deposits |
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Due to stockholder |
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Total current liabilities |
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| Long-term liabilities | ||||||||
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PPP loan less current portion |
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Operating lease liability less current portion |
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Total long-term liabilities |
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Total liabilities |
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| Stockholders' equity: | ||||||||
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Preferred stock, $ par value; |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
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Total stockholders' equity |
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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 (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021
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Three months ended |
Nine months ended |
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December 31, |
December 31, |
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2022 |
2021 |
2022 |
2021 |
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Net revenues |
$ | $ | $ | $ | ||||||||||||
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Cost of sales |
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Gross Profit |
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| Operating expenses: | ||||||||||||||||
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Income (loss) from operations |
( |
) | ( |
) | ||||||||||||
| Other income (expense): | ||||||||||||||||
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Forgiveness of Payroll Protection Program |
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Interest income |
||||||||||||||||
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Interest and finance expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Total other income (expense) |
( |
) | ||||||||||||||
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Income (loss) before provision for income taxes |
( |
) | ( |
) | ||||||||||||
| Provision for (benefit) income taxes: | ||||||||||||||||
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Current |
( |
) | ||||||||||||||
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Deferred |
( |
) | ( |
) | ||||||||||||
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Total provision (benefit) for income taxes |
( |
) | ( |
) | ||||||||||||
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Net income (loss) |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
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Basic and diluted per common share: |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
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Weighted average shares of common stock outstanding - basic and diluted |
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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 NINE MONTHS ENDED December 31, 2022 AND 2021
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Common Stock |
Common Stock |
Additional Paid-in |
Accumulated |
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Shares |
Amount |
Capital |
Deficit |
Total |
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Balance at April 1, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Net (loss) |
( |
) | ( |
) | ||||||||||||||||
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Balance at June 30, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Net (loss) |
( |
) | ( |
) | ||||||||||||||||
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Balance at September 30, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Net (loss) |
( |
) | ( |
) | ||||||||||||||||
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Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Balance at April 1, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Stock based compensation |
287,844 | |||||||||||||||||||
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Net (loss) |
( |
) | ( |
) | ||||||||||||||||
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Balance at June 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Net income |
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Balance at September 30, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Net income |
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Balance at December 31, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2022 AND 2021
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2022 |
2021 |
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| Cash flows from operating activities: | ||||||||
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Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) operating activities: | ||||||||
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Depreciation and amortization |
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Write-off of inventories |
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Bad debt |
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Deferred taxes |
( |
) | ||||||
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Non-cash interest expense |
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Amortization of right-to-use asset |
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Stock based compensation |
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Forgiveness of Paycheck Protection Program loan |
( |
) | ||||||
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Warrant liability |
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| Changes in operating assets and liabilities balances: | ||||||||
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Accounts receivable |
( |
) | ||||||
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Inventories |
( |
) | ( |
) | ||||
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Prepaid expenses and other current assets |
( |
) | ||||||
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Loan receivable |
( |
) | ||||||
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Accounts payable |
( |
) | ( |
) | ||||
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Customer deposits |
( |
) | ||||||
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Accrued expenses and other current liabilities |
( |
) | ( |
) | ||||
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Payments of operating lease liability |
( |
) | ( |
) | ||||
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Net cash provided by (used in) operating activities |
( |
) | ||||||
| Cash flows provided (used) in financing activities: | ||||||||
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Due to shareholder |
( |
) | ( |
) | ||||
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Proceeds from line of credit |
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Repayments of line of credit |
( |
) | ( |
) | ||||
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Proceeds (payments) from/to PPP loan |
( |
) | ( |
) | ||||
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Net cash provided by (used in) financing activities |
( |
) | ||||||
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Net increase (decrease) in cash and cash equivalents |
( |
) | ( |
) | ||||
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
$ | $ | ||||||
| Cash paid for: | ||||||||
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Interest |
$ | $ | ||||||
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Taxes |
$ | $ | ||||||
| Non-cash activities: | ||||||||
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Reclass of Warrant Liability to Additional Paid in Capital |
$ | ( |
) | $ | ||||
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Initial recognition of prepaid warrant expense |
$ | ( |
) | $ | ||||
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 NINE MONTHS ENDED December 31, 2022 AND 2021
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
NOTE 3 - INVENTORIES
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Inventories at December 31, 2022 consisted of the following: |
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Current |
Long Term |
Total |
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Raw materials |
$ | $ | $ | |||||||||
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Finished goods |
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Totals |
$ | $ | $ | |||||||||
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Inventories at March 31, 2022 consisted of the following: |
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Current |
Long Term |
Total |
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Raw materials |
$ | $ | $ | |||||||||
|
Finished goods |
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Totals |
$ | $ | $ | |||||||||
NOTE 4 - INTANGIBLE ASSETS
Intangible assets are being amortized using the straight-line method over periods ranging from
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December 31, 2022 |
March 31, 2022 |
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Cost |
Weighted Average Amortization Period (Years) |
Accumulated Amortization |
Net Carrying Amount |
Cost |
Weighted Average Amortization Period (Years) |
Accumulated Amortization |
Net Carrying Amount |
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Patents & Trademarks |
$ | - | $ | ( |
) | $ | $ | - | $ | ( |
) | $ | ||||||||||||||||||||||||
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Estimated aggregate future amortization expense related to intangible assets is as follows: |
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For the fiscal years ended March 31, |
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2023 |
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2024 |
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2025 |
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2026 |
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2027 |
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Thereafter |
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| $ |
NOTE 5 – CONCENTRATIONS
During the three months ended December 31, 2022, customers accounted for
During the nine months ended December 31, 2022, customers accounted for
As of December 31, 2022, customers represented
The Company’s customer base is comprised of foreign and domestic entities with diverse demographics. Net revenues from foreign customers for the three and nine months ended December 31, 2022 were $
Net revenues from foreign customers for the three and nine months ended December 31, 2021 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 December 31, |
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2022 |
2021 |
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| Net Revenue in the US | ||||||||
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Chemical |
$ | $ | ||||||
|
Electronics |
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Engineering |
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| Net Revenue outside the US | ||||||||
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Chemical |
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Electronics |
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Engineering |
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Total Revenues |
$ | $ | ||||||
|
Nine Months Ended December 31, |
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2022 |
2021 |
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| Net Revenue in the US | ||||||||
|
Chemical |
$ | $ | ||||||
|
Electronics |
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|
Engineering |
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| Net Revenue outside the US | ||||||||
|
Chemical |
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Electronics |
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Engineering |
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Total Revenues |
$ | $ | ||||||
|
Chemical |
Electronics |
Engineering |
Total |
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| Three months ended December 31, 2022 | ||||||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Segment operating income (loss) |
$ | $ | $ | $ | ||||||||||||
| Nine months ended December 31, 2022 | ||||||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Segment operating income |
$ | $ | ( |
) | $ | $ | ||||||||||
| Three months ended December 31, 2021 | ||||||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Segment operating income |
( |
) | ( |
) | ( |
) | $ | ( |
) | |||||||
| Nine months ended December 31, 2021 | ||||||||||||||||
|
Revenue from external customers |
$ | $ | $ | $ | ||||||||||||
|
Segment operating income |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Total assets at December 31, 2022 |
$ | $ | $ | $ | ||||||||||||
|
Total assets at March 31, 2022 |
$ | $ | $ | $ | ||||||||||||
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 |
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FY 2023 |
March 31, 2023 |
$ | |||
|
FY 2024 |
March 31, 2024 |
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FY 2025 |
March 31, 2025 |
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FY 2026 |
March 31, 2026 |
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FY 2027 |
March 31, 2027 |
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FY 2028 |
March 31, 2028 |
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FY 2029 |
March 31, 2029 ends June 30, 2028 |
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|
Less: Amount attributable to imputed interest |
( |
) | |||
| $ | |||||
|
Weighted average remaining lease term (in years) |
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|
Weighted average discount rate |
% | ||||
|
Present Value of future payments |
$ | ||||
Rent and real estate tax expense for all facilities for the three and nine months ended December 31, 2022 was approximately was approximately $
Rent and real estate tax expense for all facilities for the three and nine months ended December 31, 2021 was approximately 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 – LINE OF CREDIT
On June 15, 2018, the Company obtained an unsecured revolving line of credit, with a limit of $
NOTE 11 – WARRANT LIABILITY
On July 2, 2021, ADM entered into a consulting agreement. The agreement granted a consultant a warrant to purchase up to
During the preparation of our consolidated financial statements for the three months ended June 30, 2022, we identified an error relating to the accounting treatment of the initial warrant liability in July of 2021 that was originally valued at approximately $
We concluded the impact on the interim financial statements was immaterial and corrected the balances as of June 30, 2022.
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.
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 December 31, 2022 and March 31, 2022, there were no claims against us for product liability.
COVID-19 Pandemic
The Company had reduced revenues in the electronic and chemical segments as a result of the Covid pandemic. In the electronic segment certain orders of medical devices manufactured by the Company were reduced or delayed due to the cessation of elective surgeries during the pandemic and generally reduced activities by customers. In the chemical segment certain of the Company’s water-based industrial coatings and adhesives orders were reduced due to some customers having shutdowns or reduced activities during the pandemic. We intend to continue to evaluate and may, in certain circumstances, take preemptive actions to preserve liquidity during the COVID-19 pandemic. As the circumstances around the COVID-19 pandemic remain uncertain, we continue to actively monitor the pandemic's impact on us, including our financial position, liquidity, results of operations, and cash flows.
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 NINE MONTHS ENDED DECEMBER 31, 2022 AS COMPARED TO DECEMBER 31, 2021.
|
For the three months ended December 31, 2022 |
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|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 331,878 | $ | 485,454 | $ | 165,830 | $ | 983,162 | ||||||||
|
Cost of Sales |
187,341 | 277,133 | 43,210 | 507,684 | ||||||||||||
|
Gross Profit |
144,537 | 208,321 | 122,620 | 475,478 | ||||||||||||
|
Gross Profit Percentage |
44 | % | 43 | % | 74 | % | 48 | % | ||||||||
|
Operating Expenses |
121,400 | 190,287 | 71,038 | 382,725 | ||||||||||||
|
Operating Income (Loss) |
23,137 | 18,034 | 51,582 | 92,753 | ||||||||||||
|
Other income (expenses) |
415 | 598 | 5 | 1,018 | ||||||||||||
|
Income (loss) before benefit from income taxes |
$ | 23,552 | $ | 18,632 | $ | 51,587 | $ | 93,771 | ||||||||
|
For the three months ended December 31, 2021 |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 331,812 | $ | 347,911 | $ | 69,931 | $ | 749,654 | ||||||||
|
Cost of Sales |
183,678 | 206,725 | 33,138 | 423,541 | ||||||||||||
|
Gross Profit |
148,134 | 141,186 | 36,793 | 326,113 | ||||||||||||
|
Gross Profit Percentage |
45 | % | 41 | % | 53 | % | 44 | % | ||||||||
|
Operating Expenses |
331,519 | 329,459 | 81,307 | 742,285 | ||||||||||||
|
Operating Income (Loss) |
(183,385 | ) | (188,273 | ) | (44,514 | ) | (416,172 | ) | ||||||||
|
Other income (expenses) |
149,123 | 139,742 | 41,914 | 330,779 | ||||||||||||
|
Income (loss) before benefit from income taxes |
$ | (34,262 | ) | $ | (48,531 | ) | $ | (2,600 | ) | $ | (85,393 | ) | ||||
|
Variance |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 66 | $ | 137,543 | $ | 95,899 | $ | 233,508 | ||||||||
|
Cost of Sales |
3,663 | 70,408 | 10,072 | 84,143 | ||||||||||||
|
Gross Profit |
(3,597 | ) | 67,135 | 85,827 | 149,365 | |||||||||||
|
Gross Profit Percentage |
-1 | % | 2 | % | 21 | % | 5 | % | ||||||||
|
Operating Expenses |
(210,119 | ) | (139,172 | ) | (10,269 | ) | (359,560 | ) | ||||||||
|
Operating Income (Loss) |
206,522 | 206,307 | 96,096 | 508,925 | ||||||||||||
|
Other income (expenses) |
(148,708 | ) | (139,144 | ) | (41,909 | ) | (329,761 | ) | ||||||||
|
Income (loss) before benefit from income taxes |
$ | 57,814 | $ | 67,163 | $ | 54,187 | $ | 179,164 | ||||||||
|
For the nine months ended December 31, 2022 |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 1,049,448 | $ | 1,584,003 | $ | 411,387 | $ | 3,044,838 | ||||||||
|
Cost of Sales |
587,012 | 936,513 | 104,743 | 1,628,268 | ||||||||||||
|
Gross Profit |
462,436 | 647,490 | 306,644 | 1,416,570 | ||||||||||||
|
Gross Profit Percentage |
44 | % | 41 | % | 75 | % | 47 | % | ||||||||
|
Operating Expenses |
426,888 | 652,885 | 175,777 | 1,255,550 | ||||||||||||
|
Operating Income (Loss) |
35,548 | (5,395 | ) | 130,867 | 161,020 | |||||||||||
|
Other income (expenses) |
(1,996 | ) | (3,054 | ) | (822 | ) | (5,872 | ) | ||||||||
|
Income before provision for income taxes |
$ | 33,552 | $ | (8,449 | ) | $ | 130,045 | $ | 155,148 | |||||||
|
For the nine months ended December 31, 2021 |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 1,017,895 | $ | 911,569 | $ | 393,407 | $ | 2,322,871 | ||||||||
|
Cost of Sales |
562,141 | 662,483 | 107,488 | 1,332,112 | ||||||||||||
|
Gross Profit |
455,754 | 249,086 | 285,919 | 990,759 | ||||||||||||
|
Gross Profit Percentage |
45 | % | 27 | % | 73 | % | 43 | % | ||||||||
|
Operating Expenses |
881,102 | 780,974 | 340,426 | 2,002,502 | ||||||||||||
|
Operating Income (Loss) |
(425,348 | ) | (531,888 | ) | (54,507 | ) | (1,011,743 | ) | ||||||||
|
Other income (expenses) |
303,031 | 268,595 | 117,078 | 688,704 | ||||||||||||
|
Income before provision for income taxes |
$ | (122,317 | ) | $ | (263,293 | ) | $ | 62,571 | $ | (323,039 | ) | |||||
|
Variance |
||||||||||||||||
|
Chemical |
Electronics |
Engineering |
Total |
|||||||||||||
|
Revenue |
$ | 31,553 | $ | 672,434 | $ | 17,980 | $ | 721,967 | ||||||||
|
Cost of Sales |
24,871 | 274,030 | (2,745 | ) | 296,156 | |||||||||||
|
Gross Profit |
6,682 | 398,404 | 20,725 | 425,811 | ||||||||||||
|
Gross Profit Percentage |
-1 | % | 14 | % | 2 | % | 4 | % | ||||||||
|
Operating Expenses |
(454,214 | ) | (128,089 | ) | (164,649 | ) | (746,952 | ) | ||||||||
|
Operating Income (Loss) |
460,896 | 526,493 | 185,374 | 1,172,763 | ||||||||||||
|
Other income (expenses) |
(305,027 | ) | (271,649 | ) | (117,900 | ) | (694,576 | ) | ||||||||
|
Income (loss) before benefit from income taxes |
$ | 155,869 | $ | 254,844 | $ | 67,474 | $ | 478,187 | ||||||||
Revenues for the three months ended December 31, 2022 increased by $233,508. The increase is a result of increased sales of $95,899 in the Engineering segment, $137,543 in the Electronics segment and $66 in the Chemical segment.
Gross profit for the three months ended December 31, 2022 increased by $149,365. The increase in gross profit resulted primarily from increased sales in Electronics and Engineering sales.
Revenues for the nine months ended December 31, 2022 increased by $721,967. The increase is a result of increased sales of $31,553 in the Chemical segment, $672,434 in the Electronics segment and $17,980 in the Engineering segment.
Gross profit for the nine months ended December 31, 2022 increased by $425,811. The increase in gross profit resulted primarily from increased sales in Electronics and Chemical sales.
We are highly dependent upon certain customers. During the three months ended December 31, 2022, two customers accounted for 50% of our net revenue. Net revenues from foreign customers for the three months ended December 31, 2022 was $80,465 or 8%.
During the three months ended December 31, 2021, two customers accounted for 66% of our net revenue. Net revenues from foreign customers for the three months ended December 31, 2021 was $80,358 or 11%.
During the nine months ended December 31, 2022, two customers accounted for 45% of our net revenue. Net revenues from foreign customers for the nine months ended December 31, 2022 was $292,036 or 10%.
The complete loss of or significant reduction in business from, or a material adverse change in the financial condition of any of our customers could cause a material and adverse change in our revenues and operating results.
Income from operations for the three months ended December 31, 2022 was $92,753 compared to loss from operations for the three months ended December 31, 2021 of ($416,172).
Other income decreased $329,761 for the three months ended December 31, 2022. The decrease is mainly attributable to the PPP forgiveness of $361,275 in 2021.
Other income decreased $694,576 for the nine months ended December 31, 2022. The decrease is mainly attributable to the PPP forgiveness of $361,275 in 2021.
The foregoing resulted in net income before provision for income taxes for the three and nine months ended December 31, 2022 of $93,771 and $155,148 respectively. Earnings per share were $0.00 for the three and nine months ended December 31, 2022.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2022, we had cash and cash equivalents of $997,685 as compared to $1,038,498 at March 31, 2022. The $40,813 decrease was primarily the result of cash provided in operations during the nine-month period in the amount of $215,022 and cash used in financing activities of $255,835. 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 nine-month ending periods indicated:
|
December 31, 2022 |
December 31, 2021 |
|||||||
|
Net cash provided by (used in) operating activities |
$ | 215,022 | $ | (374,942 | ) | |||
|
Net cash provided by (used in) investing activities |
- | - | ||||||
|
Cash flows provided (used) in financing activities: |
(255,835 | ) | 669 | |||||
|
Net increase (decrease) in cash and cash equivalents |
(40,813 | ) | (374,273 | ) | ||||
|
Cash and cash equivalents - beginning of period |
1,038,498 | 1,546,950 | ||||||
|
Cash and cash equivalents - end of period |
997,685 | 1,172,677 | ||||||
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 2023.
Based on current expectations, we believe that our existing cash and cash equivalents of $997,685 as of December 31, 2022, and other potential sources of cash will be sufficient to meet our cash requirements. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
OPERATING ACTIVITIES
Net cash provided by operating activities was $215,022 for the nine months ended December 31, 2022, as compared to net cash used by operating activities of $374,942 for the nine months ended December 31, 2021. The cash provided during the nine months ended December 31, 2022 was primarily due to a decrease in net operating assets of $43,794, offset by a decrease in net operating liabilities of $68,391, offset by net income of $155,148 write-off of inventories of $54,692, depreciation and amortization of $63,737, and stock based compensation of $33,310 (see Note 12 Warrant Liability), and non-cash interest expense of $20,320.
INVESTING ACTIVITIES
No cash was provided for or used in investing activities for the nine months ended December 31, 2022.
FINANCING ACTIVITIES
For the nine months ended December 31, 2022, net cash used by financing activities was $255,835 due to a net borrowing and payments in the line of credit of $222,697, a decrease in due to stockholder of $29,104 and repayments on the PPP loan of $4,034.
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 December 31, 2022, approximately $748,000 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 December 31, 2022, 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 December 31, 2022, and March 31, 2022 and the related condensed consolidated statements of operations, and cash flows for the three and nine months ended December 31, 2022 and 2021, 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, 2022.
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 |
|
February 14, 2023 |