SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File No. 0-17629
ADM TRONICS UNLIMITED, INC.
(Exact name of registrant as specified in its Charter)
Delaware 22-1896032
(State or Other Jurisdiction (I.R.S. Employer Identifi-
of Incorporation or organization) cation Number)
224-S Pegasus Ave., Northvale, New Jersey 07647
(Address of Principal Executive Offices)
Issuer's Telephone Number, including area code: (201) 767-6040
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Issuer was required to file such reports),
and (2) has been subject to the filing requirements for the past 90 days:
YES X NO ______
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
51,882,037 shares of Common Stock, $.0005 par value,
as of October 25, 2004
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ADM TRONICS UNLIMITED, INC.
INDEX
Page Number
Part I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets - September 30, 2004
and March 31, 2004 3
Consolidated Statements of Operations - For the
three months and six months ended September
30, 2004 and 2003 4
Consolidated Statement of Changes in Stockholders'
Equity - For the six months ended September 30, 2004 4
Consolidated Statements of Cash Flows - For the
six months ended September 30, 2004 and 2003 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
2
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER MARCH
ASSETS 30, 2004 31, 2004
Current assets:
Cash and equivalents $2,161,390 $ 90,081
Accounts receivable - trade, less allowance
for doubtful accounts of $4,593 124,988 118,433
Inventories:
Raw materials and supplies 105,034 159,497
Finished goods 35,445 63,438
Equipment held for sale 343,101 388,715
Other current assets 39,133 32,993
Total current assets 2,809,091 853,157
Property and equipment - at cost, net of
accumulated depreciation of $267,930 and
$268,353, respectively 11,329 8,887
Equipment in use and under lease agreements -
At cost net of accumulated depreciation of
$821,731 and $758,330, respectively 116,494 179,895
Loan receivable from officer, bearing
interest at 3% per annum, unsecured 49,188 49,188
Deferred financing costs and other assets 425,246 56,433
Total assets 3,411,348 1,147,560
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 124,985 $ 159,798
Accrued expenses and other current liabilities 91,723 51,340
Total current liabilities 216,708 211,138
Unsecured Convertible 6% Notes Payable 2,687,500 -
Note payable, long-term 135,000 135,000
Total long term liabilities 2,822,500 135,000
Stockholders' equity 372,140 801,422
Total liabilities and
stockholders' equity $3,411,348 $1,147,560
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ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
Revenues $267,686 $321,475 $652,983 $ 593,783
Costs and expenses:
Cost of sales 196,191 172,321 365,770 331,574
Selling, general and
administrative 564,634 182,621 756,441 343,254
Total costs and expenses 760,825 354,942 1,122,211 674,828
Operating loss (493,139) (33,467) (469,228) (81,045)
Other income:
Interest and other income 39,879 77 39,946 166
Net loss (453,260) (33,390) (429,282) (80,879)
Net loss per share $(0.009) $(0.001) $(0.008) $(0.002)
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
Preferred Common
Shares Shares Capital
5,000,000 150,000,000 in
Authorized Authorized excess
$.01 Par $.0005 Par of Par Accumulated
Value Par Value Value Value Deficit Total
Balances -
March 31,
2004 - 51,882,037 $25,941 $6,813,368 $(6,037,887) $801,422
Net loss for
the period
ended
September 30,
2004 (429,282) (429,282)
Balances -
September 30,
2004 - 51,882,037 $25,941 $6,813,368 $(6,467,169) $372,140
4
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
SEPTEMBER 30,
2004 2003*
Cash flows from Operating activities:
Net loss $ (429,282) $( 80,879)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 69,174 77,505
Changes in operating assets and liabilities:
Accounts receivable - trade (6,555) (11,701)
Inventories 128,070 75,107
Other current assets (6,140) (600)
Other assets 1,527 3,507
Accounts payable - trade (34,813) (16,296)
Accrued expenses and other 40,383 (20,689)
Net cash flows provided by (used in)
operating activities (237,636) 25,954
Cash flows from Investing activities:
Purchases of fixed assets (8,215) -
Net cash flows provided by (used in)
investing activities (8,215) -
Cash flows from Financing activities:
Gross proceeds from private placement offering -
notes payable, $2,687,500 -
Costs of private placement offering (370,340) -
Net cash provided by Financing activities $2,317,160 -
Net change in cash and cash equivalents $2,071,309 $ 25,954
Cash and cash equivalents--beginning of period $ 90,081 $ 49,765
Cash and cash equivalents--end of period $2,161,390 $ 75,719
Supplemental disclosure of cash flow activities:
Interest paid - -
*reclassified
5
ADM TRONICS UNLIMITED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1-Basis of Presentation:
The consolidated balance sheet at the end of the preceding fiscal year has
been derived from the audited consolidated balance sheet contained in the
Company's annual report on Form 10-KSB for the fiscal year ended March 31,
2004 (the "Form 10-KSB") and is presented for comparative purposes. All
other financial statements are unaudited. In the opinion of management,
all adjustments which include only normal recurring adjustments necessary
to present fairly the financial position, results of operations and changes
in financial positions for all periods presented have been made. The
results of operations for interim periods are not necessarily indicative of
the operating results for the full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles in the United States
have been omitted in accordance with the published rules and regulations of
the Securities and Exchange Commission. These consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Form 10-KSB.
Note 2. Segment Information
Information about segment information is as follows:
Six Months Ended September 30, 2004: CHEMICAL MEDICAL TOTAL
Revenues from external customers 436,486 216,497 652,983
Segment profit (loss) 26,196 (495,424) (469,228)
Six Months Ended September 30, 2003:
Revenues from external customers 466,747 127,036 593,783
Segment profit (loss) (58,543) (22,502) (81,045)
Three Months Ended September 30, 2004:
Revenues from external customers 196,529 71,157 267,686
Segment profit (loss) (7,917) (485,222) (493,139)
Three Months Ended September 30, 2003:
Revenues from external customers 225,530 95,945 321,475
Segment profit (loss) (35,299) 1,832 (33,467)
Note 3. Private Placement Offering
a) The Company is in the process of a private placement offering with regard
to its subsidiary, Ivivi Technologies, Inc., formerly known as AA Northvale
Medical Associates, Inc. ("Ivivi"), of up to 35 Units for an aggregate price
of $3,500,000. Each Unit consists of a i) $100,000 Joint Unsecured
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Convertible Note payable on December 31, 2009, ii) one Class A Common Stock
Purchase Warrant of the Company, and iii) one Class A Common Stock Purchase
Warrant of Ivivi. Investors may exercise either warrant, but not both.
Those warrants which are non-exercised must be surrendered to either the
Company or Ivivi. The Joint unsecured 6% Convertible Notes may be converted
into Common Stock of Ivivi or Common Stock of the Company at a conversion
price as defined in the private placement memorandum. Management has not
assigned any value to the warrants. As of September 30, 2004 the Company
has raised $2,687,500 of 6% Convertible Notes Payable from such offering of
which approximately $370,000 were for costs incurred in raising such funds.
These costs have been deferred and included in other assets. The conversion
feature of the notes and the exercise of the warrants is allowed through
November, 2009. It is anticipated by management that the holders of the
notes will convert the notes payable into either common stock of Ivivi or
of the Company in the near future. If the noteholders convert the notes to
common stock, the costs of such financing will be charged to the capital in
excess of par value account. If the notes are not converted, then such costs
will be amortized over the term of the notes.
Selling, general and administrative expenses for the three-month period
ended September 30, 2004 include the compensation for Ivivi's new management
team which has been employed to develop, expand and market Ivivi's business
which is principally the SofPulse medical device technology and the expenses
related thereto.
In connection with the private placement offering, Ivivi is planning to file
a Registration Statement with the Securities and Exchange Commission for its
common stock. There is a mandatory conversion of the notes into the common
stock of Ivivi upon the effectiveness of such registration. Reference is made
to the Company's Current Report on Form 8K dated August 31, 2004.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At September 30, 2004 the Company had cash and equivalents of $2,161,390 as
compared to $90,081 at March 31, 2004. This increase was the result of
proceeds received by the Company from a private placement financing offset
by costs of such financing and by cash used in operations.
Operating Activities
Net cash flows used in operating activities was $237,636 for the six months
ended September 30, 2004 as compared to net cash flow provided by operating
activities of $25,954 for the six months ended September 30, 2003. This
increase was primarily due to increased costs related to the Company's
medical device subsidiary's expansion of personnel and increased other
operational expenses related thereto.
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Investing Activities
The Company purchased fixed assets of $8,215 during the period.
Financing Activities
The Company has received net proceeds of $2,317,160 from a private placement
offering of Unsecured Convertible Notes and Warrants for the Company's and a
subsidiary's common stock.
The Company does not have any material external sources of liquidity or
unused sources of funds.
Results of Operations
Quarter Ended September 30, 2004
Revenues
Revenues were $267,686 in 2004 as compared to $321,475 in 2003 representing
a decrease of $53,789 or 17%. This decrease was the result of a decrease
in revenues from the Company's medical electronic activities of $24,788 and
a decrease in chemical revenues of $29,001.
Gross Profit
Gross profit of $71,495 in 2004 was $77,659 below the gross profit of $149,154
in 2003. Gross profit was 27% of revenues in 2004 as compared with 46% of
revenues in 2003. The decrease in gross profit margin was primarily due to
the product mix of sales with higher sales of products with a lower gross
margin.
Operating Loss
Operating loss in 2004 was $493,139 compared to $33,467 in 2003. Selling,
general and administrative expenses increased by $382,013 or 209% in the
2004 period primarily due to significant increases in personnel and overhead
expenses of the Company's medical device subsidiary, Ivivi Technologies, Inc.
that were funded by the receipt of proceeds from a private placement offering
instituted to fund such increased operations.
Other Income
Other income in 2004 was $39,879 as compared to $77 in 2003. The increase
was primarily from payments received pursuant to the settlement of litigation
and increased interest income from increased amounts invested.
8
Results of Operations
Six Months Ended September 30, 2004
Revenues
Revenues were $652,983 in 2004 as compared to $593,783 in 2003 representing
an increase of $59,200 or 10%. Revenues from the Company's medical
electronics activities increased $89,461 and chemical revenues decreased
$30,261.
Gross Profit
Gross profit of $287,213 in 2004 was $25,004 or 10% higher than the gross
profit of $262,209 in 2003. Gross profit was 44% of revenues in 2004 and
2003.
Operating Loss
Operating loss was $469,228 in 2004 compared to $81,045 in 2003. Selling,
general and administrative expenses increased by $413,187 or 120% in 2004
primarily due to significant increases in personnel and overhead expenses
of the Company's medical device subsidiary, Ivivi Technologies, Inc. that
were funded by the receipt of proceeds from a private placement offering
instituted to fund such increased operations.
Other Income
Other income of $39,946 in 2004 increased $39,780 from $166 in 2003. The
increase was primarily from payments received pursuant to the settlement of
litigation and increased interest income from increased amounts invested.
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in its Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and
that such information is accumulated and communicated to management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Management necessarily
applies its judgment in assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only reasonable assurance
regarding management's control objectives.
With the participation of management, the Company's Chief Executive Officer
and Chief Financial Officer evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures at the
conclusion of the three months ended September 30, 2004. Based upon this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures were effective in
ensuring that material information required to be disclosed is included in
the reports that it files with the Securities and Exchange Commission.
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CHANGES IN INTERNAL CONTROLS
There were no significant changes in the Company's internal controls or, to
the knowledge of management of the Company, in other factors that could
significantly affect internal controls subsequent to the date of the Company's
most recent evaluation of its disclosure controls and procedures utilized to
compile information included in this filing.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No.
31.1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
A current report on Form 8-K dated August 31, 2004
was filed during the quarter for which this report
is filed and is incorporated herein by reference.
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
November 19, 2004
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