SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[ x] THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[ ] OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For the transition period from________to_________
Commission File No. 0-17629
ADM TRONICS UNLIMITED, INC.
(Exact Name of Company as Specified in its Charter)
Delaware 22-1896032
(State or Other Jurisdiction of (I.R.S. Employer Identifi-
Incorporation or Organization) cation Number)
224-S Pegasus Avenue, Northvale, New Jersey 07647
(Address of Principal Executive Offices) (Zip Code)
Company's Telephone Number, including
Area Code: (201) 767-6040
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $.0005 par value
Check whether the issuer (1) 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 registrant was required to file such reports), and (2) has
been subject to the filing requirements for at least the past 90 days:
YES X NO
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year
$1,918,651
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past
60 days prior to the date of filing:
Approximately $7,820,000 as of June 24, 1996
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
42,474,907 shares of Common Stock, $.0005 par value
as of June 24, 1996
If the following documents are incorporated by reference, briefly describe
them and identify the Part of the Form 10-KSB (e.g., Part I, Part II, etc.)
into which the document is incorporated: (1) Any annual report to security
holders; (2) Any proxy or information statement; and (3) Any prospectus
filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933:
Not Applicable
Transitional Small Business Disclosure Format (check one):
YES NO X
2
Item 1. Description of Business
ADM Tronics Unlimited, Inc. (the "Company"), was organized under the laws
of the State of Delaware on November 24, 1969.
Sonotron Technology
Dr. Alfonso Di Mino, while employed by the Company, conceived and
developed a technique pursuant to which a subject being treated is exposed
to a corona discharge beam generated by combining audio and radio frequency
waves (the "Sonotron Technology"). The Sonotron Technology is the subject
of a United States Patent (the "Di Mino U.S. Patent") granted in 1987 to
Dr. Di Mino entitled, "Corona Discharge Thermotherapy Technique".
Dr. Di Mino assigned to the Company the Di Mino U.S. Patent without any
consideration therefrom. There are no arrangements, understandings or
agreements whereby Dr. Di Mino will be provided with any consideration in
the future with respect to the Di Mino U.S. Patent. Foreign Patent
applications bearing the same title and corresponding to the Di Mino U.S.
Patent have been issued as follows:
European Patent Office - (United Kingdom, West Germany, France,
Sweden, Switzerland, Italy and Holland).
Brazil.
Japan.
The Company has utilized the Sonotron Technology to develop Sonotron
Devices which are designed to treat subjects suffering from the pain of
osteoarthritis and inflammatory joint conditions.
The Company commissioned the Instrumentation Systems Center of the
University of Wisconsin-Madison (the "ISC") to monitor a study of the Sonotron
Device which are for human application to evaluate its effect on the knee joint
in subjects with osteoarthritis and inflammatory joint conditions. The
purpose of the study was to gather data to submit to the United States Food
and Drug Administration (the "FDA"). The study was conducted at five regional
centers on 98 human subjects during 1987 and 1988. Data were analyzed by an
analysis on non-parametric measures to compare the relative responses of the
randomly assigned control and treated subjects. ISC, in a report dated
July 18, 1988, found that two of the ten data sets showed a high probability
that the subjects' assessment of pain one week after administration was
reduced in the treated, relative to the untreated, subjects. ISC further
found, with respect to two additional data sets, that certain other data
suggested a trend of improvement one week after administration in the
treated, relative to the untreated, subjects, but with lower probability.
None of the 98 subjects in the study reported adverse reactions to the
administration of the Sonotron Technology which were deemed significant or
long lasting.
3
The Company believes that the Sonotron Technology can be utilized to
reduce lameness in both thoroughbred and standardbred horses. In this
connection, the Company commissioned the School of Veterinary Medicine of
the University of Wisconsin-Madison (the "SVM") to gather data which would
confirm the effectiveness of the Sonotron Device on horses. In a report
dated December 10, 1987, the SVM concluded that the evidence from its
experiments indicated that treatment with a Sonotron Device designed for
veterinary use had a significant effect in reducing the level of lameness
in ponies which had arthritis experimentally induced and as the degree of
arthritic changes increased, the reduction in lameness was more dramatic
and became statistically more significant. The SVM further found that there
is statistical evidence that the therapy had a beneficial effect on the
level of joint motion in the arthritic ponies and resulted in reduced joint
swelling in ponies with severe arthritis. A significant reduction occurred
in the degree of joint changes seen radiographically in the ponies with severe
arthritis and in the milder cases of arthritis treated with low doses of the
therapy. The SVM further reported that there were significant reductions in
the severity of the growth of pathological lesions seen in ponies with mild
arthritis which received low doses of therapy and that a trend appears to
exist toward seeing reduced severity of lesions in ponies which had a severe
degree of arthritis and were treated with a Sonotron Device designed for
veterinary use. No differences in the degree of histopathological changes
were noted between the treated ponies and the untreated ponies with mild or
severe arthritis. The SVM did not arrive at any conclusions with respect to
whether treatment with a Sonotron Device designed for veterinary use has a
beneficial effect upon chronic degenerative joint disease in a horse and
whether such treatment will be effective upon naturally occurring cases of
equine degenerative joint disease. The Company has conducted preliminary
tests utilizing a Sonotron Device designed for veterinary use on several
race horses. Significant further testing will be required to determine
whether or not the administration of the Sonotron Technology to race horses
will prove beneficial and support the establishment of a viable market.
The Company's software enables it to monitor the usage of Sonotron Devices
in the field and to "refill" a predetermined number of dosages in the
Sonotron Devices ("Treatment Units") by means of a telephone connection.
The Company believes that such procedures can substantially diminish the
possibility of unauthorized use of the Sonotron Devices and enable the
Company to charge users thereof on a per dosage basis.
The Company has granted to each of Sonotron Medical Systems, Inc.
("SMI") and VET Sonotron Systems, Inc. ("VET") a royalty-free, worldwide,
exclusive, irrevocable license to the Di Mino U.S. Patent, the foreign
patent applications and the Sonotron Technology. The license granted to
SMI permits SMI to manufacture, to have manufactured and to sell apparatus
utilizing the Sonotron Technology exclusively in connection with human
medical applications thereof (the "SMI License"). The SMI License provides
that future improvements or discoveries relating to the Sonotron Technology,
if any, which are made by Dr. Di Mino or any other officer or employee of
the Company or any affiliates thereof, whether or not patentable, and
applicable to human medical applications, are to be included in the SMI
License. The license granted to VET is substantially identical in its terms to
that of the SMI License, except that the use of the Sonotron Technology by VET
is limited exclusively to veterinary applications. SMI and VET are majority
owned subsidiaries of the Company.
4
The Company acts as a sublicensee of SMI for the purpose of manufacturing
Sonotron Devices. The Company has agreed to manufacture Sonotron Devices to be
used for human medical applications at the Company's cost plus ten percent.
The Company has been registered by the FDA as a Registered Medical Device
Establishment for the manufacture of Sonotron Devices. Such registration is
renewable annually and although the Company does not believe that the
registration will not be renewed annually by the FDA, there can be no
assurance of such renewal. Any failure to obtain an annual renewal could be
expected to have a material adverse effect on the Company.
In March 1989, in response to a Pre-Market Notification filed by the
Company with the FDA, the FDA notified the Company that the Sonotron Device,
under the FDA's standards, is not substantially equivalent to certain
medical device marketed in interstate commerce prior to May 28, 1976. In March
1991, a further Pre-Market Notification was filed with the FDA on behalf of the
Company with respect to the then current model of the Sonotron Devices which
Notification was subsequently voluntarily withdrawn by the Company. The
Company intends to refile a Pre-Market Notification accompanied by
additional data. In the event that Sonotron Devices cannot be marketed
pursuant to a Pre-Market Notification, the Company will be required to obtain
an approved Pre-Market Approval Application ("PMA") from the FDA before the
Sonotron Devices can be marketed in the United States for commercial
distribution in connection with human applications. The FDA advised the
Company that its determination with respect to the initial Pre-Market
Notification was based upon (a) the new intended use of applying superficial
heat at non-therapeutic temperatures for the treatment of osteoarthritis, and
(b) new types of safety and effectiveness questions that are raised by the new
technological characteristics of the Sonotron Devices when compared to certain
devices marketed before May 28, 1976.
The FDA permits companies to begin to recoup certain expenses by charging
others for use of medical machines, provided that the use of such machines does
not constitute a commercial distribution thereof. Accordingly, the Company
is permitted to maintain a clinic and treatment center utilizing Sonotron
Devices, but may not advertise or otherwise promote Sonotron Devices as
being safe and effective for their intended use. In order to generate revenues
from the Sonotron Devices and to gather information in support of a PMA which
may be filed by the Company, in April 1989 the Company opened a clinic for the
treatment of pain. The clinic consisted of approximately 1,200 square feet of
space in the Company's premises in Northvale, New Jersey. The Company's clinic
did not realize any significant revenues and was closed in 1991. Three
additional clinics have been opened beginning in 1992, none of which has
produced any significant revenues.
In 1991, SMI appointed a Canadian company as its sole and exclusive
distributor in Canada of the Sonotron Devices. Because the Canadian company
was unable to obtain approval of the Quebec Association of Physicians and
Surgeons in order for Sonotron Devices to be utilized in Quebec for the
treatment of pain and decreased function associated with inflammatory
diseases prior to a mutually agreed upon date, the Distribution Agreement
between SMI and such company terminated.
5
In 1991 SMI entered into an agreement with Arthronix, Inc. ("Arthronix")
which, as subsequently amended, provided that Arthronix shall become the
sole and exclusive distributor of Sonotron Devices in substantially all of
the United States and all other countries exclusive of Austria, Canada,
Germany and Switzerland for a maximum period of 19 years (the "Arthronix
Distribution Agreement"). The exclusive distributorship with respect to the
United States was not to commence unless the FDA approved a PMA with respect
to the Sonotron Devices or the Sonotron Devices could be marketed pursuant
to a Pre-Market Notification, and the obligation of Arthronix under the
Arthronix Distribution Agreement with respect to Sonotron Devices to be used in
the United States was subject to the occurrence of either of such events. As
a result of the settlement of litigation between SMI and Arthronix, the
Arthronix Distribution Agreement was cancelled in November 1993. Reference
is made to Note 4 of Notes to Consolidated financial statements.
In August 1993 the Company entered into an agreement (the "1993
Distribution Agreement") with Arthronix and a Japanese corporation (the
"Japanese Distributor") pursuant to which, on behalf of the Company,
Arthronix granted the Japanese Distributor the exclusive right to sell and
distribute the Sonotron Device within Japan for a one year period. The Japanese
Distributor has represented to SMI that the Japanese Distributor has
received all necessary government approvals to import, sell, distribute and
use the Sonotron Device in Japan. Arthronix has received a commission in
connection with the sales to the Japanese Distributor. The 1993 Distribution
Agreement terminated in accordance with its terms in August 1994. In June 1995,
the Company appointed the Japanese Distributor as the exclusive distributor of
Sonotron Devices in Japan, Singapore and Malaysia.
Subsequent to the termination of the Arthronix Distribution Agreement, SMI
has sold additional Sonotron Devices in Belgium, Brazil, Chile, France,
Germany, Israel, Italy, Lebanon, Mexico and South Africa. Unlike the sales to
the Japanese Distributor, the Sonotron Devices delivered to the purchasers in
the foregoing countries included a limited number of Treatment Units. Any
additional Treatment Units will be sold by SMI.
In 1992, SMI granted to Advent Medical Technology, Inc. ("AMT") the
exclusive right to manage clinics in certain counties in Florida which, if
opened, would utilize Sonotron Devices for human medical purposes. At such
time, if any, that the United States Food and Drug Administration permits
marketing of Sonotron Devices, AMT would have the right to purchase any such
clinics from SMI and to be the exclusive distributor of Sonotron Devices within
the eight counties. At the same time, VET granted to AMT the exclusive right to
use, distribute or sublicense the use of Sonotron Devices designed for
veterinary use solely for veterinary use in Florida. The response to Item 5 of
the Company's Current Report on Form 8-K dated June 9, 1992 is hereby
incorporated by reference. The Company does not believe that AMT has
sufficient resources to manage any clinics. There can be no assurance that any
such clinics which the Company may open will be successful or that the results
of the treatment of human subjects with the Sonotron Devices will be favorable
or will support the Company's PMA.
The Company intends to use data obtained from clinics utilizing the
Sonotron Device as well as additional data it may obtain from others in the
Company's PMA, if filed, at the time the PMA is filed with the FDA. There can
be no assurance that the Company will obtain sufficient data in the foreseeable
future, if at all, to file a PMA or that any data theretofore or thereafter
obtained by the Company will be satisfactory or will be sufficient to support
6
the Company's PMA. The Company does not intend to make any material changes
to the Sonotron Devices nor have any such changes been made since the
completion of the research and development. In the event that Sonotron Devices
cannot be marketed pursuant to a Pre-Market Notification and the data obtained
by the Company are not favorable or, for any other reason, the Company's PMA is
not filed or, if filed, is not approved by the FDA, neither the Company nor SMI
will be able to market the Sonotron Devices in the United States to others in
connection with human applications, other than for research purposes. Under
such circumstances, it is probable that the Sonotron Devices will not be able
to be marketed with respect to human applications thereof in many foreign
countries.
During the Company's fiscal years ended March 31, 1995 and 1996, other
than the regular compensation paid by the Company to its executive officers,
the Company did not spend any appreciable amounts on testing, application,
clinical studies and company-sponsored research and development activities in
connection with the Sonotron Technology and other activities determined in
accordance with generally accepted accounting principles. During such years no
amounts were spent on customer-sponsored research and development activities
relating to the development of new products, services or techniques or the
improvement of any of the foregoing.
The manufacture, distribution and sale of medical devices and equipment
designed to relieve the suffering of pain in subjects having osteoarthritis is
highly competitive and substantially all of the Company's competitors possess
greater experience, financial resources, operating history and marketing
capabilities than does the Company. There can be no assurance that the Company
will be able to effectively compete with any or all of the foregoing on the
basis of product, effectiveness, price, service or otherwise.
During the fiscal year ended March 31, 1996, one customer accounted for
more than 10% of the Company's net sales of medical devices. Reference is made
to Note 6 of Notes to Consolidated Financial Statements. The termination of
business relations with any of the Company's significant customers would have a
material adverse effect on the Company's business and the financial condition
of the Company.
As of March 31, 1996, the dollar amount of backlog orders for Sonotron
Devices was not material.
Chemical Products for Industrial Use
The Company develops, manufactures and sells chemical products to
industrial users. Such products consist primarily of the following:
1. Water based primers and adhesives;
2. Water based coatings and resins for the printing and packaging
industry;
3. Water based chemical additives; and
4. Cosmetic, medical and related adhesives and formulations.
7
Water based primers and adhesives are chemical compounds used to bind
different plastic films. Examples are the binding of polyethylene to polyester,
nylon, vinyl and cellophane. The Company's products are similar in function to
solvent based primers that are widely used to bind plastic film, papers and
foils. Solvent based systems have come under criticism since they have been
found to be highly pollutant, dangerous to health and generally caustic in
nature. Based upon the Company's experience since 1969, including information
furnished to the Company by certain of its customers, the Company believes that
water based systems have no known polluting effects and pose no known health
hazards. There can, of course, be no assurance that any governmental
restrictions will not be imposed on the Company's water based products or that
such products will be accepted as replacements for solvent based products.
Coatings and resins for the printing industry are used to impart
properties to the printed substrate. The Company's products can be used to
coat printed material for glossy or aesthetic appeal to make such material
virtually impervious to certain types of grease and to impart other
characteristics required or desired for various products and specifications.
Certain of the Company's chemical additives are used to impart properties
to inks and other chemical products used in the food packaging and printing
industries. These additives are used for their ability to improve the
performance of such products.
During the Company's fiscal years ended March 31, 1996, 1995 and 1994,
sales of chemical based products accounted for approximately 46%, 55%, and 63%
of operating revenues, respectively. No contract exists with any of the
Company's customers which would obligate any customer to continue to purchase
products from the Company.
During the fiscal year ended March 31, 1996, two customers each accounted
for more than 10% of the Company's net sales of chemical products. Reference is
made to Note 6 of Notes to Consolidated Financial Statements. The termination
of business relations with any of the Company's significant customers would
have a material adverse effect on the Company's business and the financial
condition of the Company.
The Company purchases the raw materials used in the manufacture of its
chemical products from numerous sources. The Company believes that all
necessary raw materials for its chemical products are readily available and
will continue to be so in the foreseeable future. The Company has never had,
nor does it anticipate experiencing, any shortages of such materials. The raw
materials consist primarily of water, resins, elastomers and catalysts.
The Company generally maintains sufficient quantities of inventories of
its chemical products to meet customer demands. When orders are received by
the Company for its chemical products, the Company's customers require
immediate shipment thereof. Accordingly, in order to satisfy its customers'
needs, the Company has maintained an inventory ranging, in dollar amounts, from
15% to 30% of sales of chemical products in the form of either raw materials or
finished goods.
8
A majority of the Company's sales are distributed to customers directly
from the Company's location. Customers place purchase orders with the Company
and products are then shipped via common carrier truck delivery on an "FOB
shipping point" basis. A portion of the sales are accomplished through
distributors who place purchase orders with the Company for certain quantities
of the Company's chemical products which are shipped by common carrier to their
respective warehouses. These stocking distributors then ship product to the
ultimate customer via common carrier from their inventory of the Company's
products.
None of the Company's chemical products is protected by patents, although
the names of some of such products have been protected by trademarks. The
Company does not believe that any such trademarks are material to its business.
As of March 31, 1996, the dollar amount of backlog orders for the
Company's chemical products believed by the Company to be firm, was not
material.
The Company's chemical business is highly competitive and substantially
all of the Company's competitors possess greater experience, financial
resources, operating history and marketing capabilities than does the Company.
The Company does not believe that there are one or more dominant competitors
in such industry. There can be no assurance that the Company will be able to
effectively compete with any or all of its competitors on the basis of price,
service or otherwise. The Company cannot be considered a significant factor
with respect to the chemical products industry.
During the Company's fiscal years ended March 31, 1996 and 1995, the
Company made no material expenditures with respect to company-sponsored
research and development activities relating to its chemical business as
determined in accordance with generally accepted accounting principles other
than a portion of the regular salaries of its executive officers which may be
allocated thereto. During such fiscal years the Company did not expend any
funds on customer-sponsored research and development activities with respect
thereto.
Other Products
The Company has developed several cosmetic and pharmaceutical products.
The Company has not realized any significant revenues from such products and
there can be no assurance that any such products will account for significant
revenues or any profits in the future.
Although the Company believes that its proposed products can be
successfully marketed for over-the-counter use through one or more entities
representing numerous retail pharmacies and otherwise, there can be no
assurance that sales of such products will be material or that the Company
will be able to derive any profits therefrom.
Personnel
On June 25, 1996, the Company employed eleven persons, three of which are
executive officers of the Company. Two employees are employed by the Company on
a part-time basis.
9
Item 2. Properties
The Company leases approximately 16,000 square feet of combined office and
warehouse space from an unaffiliated third party.
Item 3. Legal Proceedings
On May 10, 1996 Arthronix filed a demand for arbitration against the
Company, SMI and the Japanese Distributor. The matter is being conducted
through the American Arbitration Association of New York City. Arthronix has
claimed commissions are owed to it in the amount of $51,000 pursuant to the
1993 Distribution Agreement. Arthronix also asserted claims for a breach of
contract and a share of the proceeds on the sales of Sonotron Devices in the
Pacific Rim countries in an amount to be determined. Arthronix further
asserted claims for tortious interference and is seeking punitive and
compensatory damages based upon an alleged failure to execute an extension of
the 1993 Distribution Agreement and fraudulent inducement in connection with
the entering into of the 1993 Distribution Agreement by Arthronix.
On May 30, 1996 the Company, SMI and a wholly-owned subsidiary of the
Company instituted an action against Arthronix, Joseph P. Laico and James
Bridges in the Superior Court of New Jersey, Bergen County, Law Division.
The Plaintiffs are seeking to recover approximately $615,000 from Arthronix
based upon breaches of settlement agreements by Arthronix. The Complaint also
alleges that the 1993 Distribution Agreement was entered into based upon
fraudulent misrepresentations of the individual defendants and that all of the
defendants tortiously interfered with a contract between the Company and
the Japanese Distributor. The Complaint seeks multiple forms of relief
including entry of judgment for the breach of prior settlement agreements,
unliquidated damages, staying of the above described arbitration proceedings, a
declaratory judgment revoking the 1993 Distribution Agreement, unliquidated
compensatory damages, punitive damages, late fees, interest and costs and other
equitable relief. The Court has entered a temporary order staying the
arbitration.
Other than the foregoing there are no material pending or threatened legal
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their property is the subject or to the knowledge of the Company,
any proceedings contemplated by governmental authorities.
Item 4. Submission of Matters to a Vote of
Security Holders
Not Applicable.
10
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters
(a) Market Information
(1) The Company's Common Stock is principally traded in the
over-the-counter market. The following table sets forth the approximate range
of high and low bid prices for the Company's Common Stock for the Company's
fiscal quarters indicated in which such stock was regularly quoted. The
quotations were obtained from NASDAQ and reflect inter-dealer prices without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.
Quarter Ended High Bid Low Bid
June 30, 1994 .44 .44
September 30, 1994 .31 .31
December 31, 1994 .31 .28
March 31, 1995 .28 .25
June 30, 1995 .22 .22
September 30, 1995 .31 .28
December 31, 1995 .18 .18
March 31, 1996 .47 .25
Due to maintenance standards for companies seeking to maintain their
listing on NASDAQ, there can be no assurance that the Company will be able to
continue such listing. Such standards require the Company to have total assets
of not less than $2,000,000; capital and surplus of not less than $1,000,000;
market value of public float of not less than $200,000; minimum bid price of
$1.00 (or market value of public float of not less than $1,000,000 and capital
and surplus of not less than $2,000,000) and two market makers.
(b) Holders
On June 25, 1996 the Company's Common Stock was held by approximately
1,700 holders of record.
(c) Dividends
The Company has never paid any cash dividends on its Common Stock and
has no intention of paying cash dividends in the foreseeable future. The
Company intends to retain any earnings it may realize to finance its future
growth.
11
Item 6. Management's Discussion and Analysis or Plan of
Operation
Results of Operations
Fiscal 1996 Compared to 1995
Revenues
Revenues were $1,839,006 in 1996 as compared to $1,556,885 in 1995 representing
an increase of $282,121 or 18%. This increase was the result of increased
sales of Sonotron Devices in foreign countries and increased purchasing from
chemical customers.
Gross Profit
Gross profit of $1,236,394 in 1996 was $151,251 or 14%, greater than the gross
profit of $1,085,145 for 1995. Gross profit was 67% of revenues in 1996 as
compared to 70% of revenues in 1995. The moderate reduction in gross profit is
related to the product mix of sales with varying gross profit margins.
Operating Income
Operating income of $244,289 in 1996 was $175,806 or a 257% increase above the
operating income of $68,483 in 1995. This was primarily the result of an
increase in gross profit coupled with a decrease in selling, general and
administrative expenses. Gross profit increased by $151,251, and selling,
general and administrative expenses decreased by $24,555.
Other Income, Net
Other income of $79,645 in 1996 was $16,919 or 27% greater than other income of
$62,726 in 1995 due to an increase in interest income from increased amounts
invested but at lower rates of return on amounts invested.
Results of Operations
Fiscal 1995 Compared to 1994
Revenues
Revenues were $1,556,885 in 1995 as compared to $1,379,420 in 1994 representing
an increase of $177,465 or 13%. This increase was primarily the result of
significantly increased sales of Sonotron Devices in foreign countries.
Gross Profit
Gross profit of $1,085,143 in 1995 was $255,514 or 31%, greater than the gross
profit of $829,629 for 1994. Gross profit was 70% of revenues in 1995 as
compared to 60% of revenues in 1994. The increase in gross profit was the
result of the product mix of sales with increased sales of those products
with a lower cost of materials.
12
Operating Income
Operating income of $68,483 in 1995 was $64,502 or a 1,620% increase above the
operating income of $3,981 in 1994. This was primarily the result of an
increase in gross profit partially offset by an increase in selling, general
and administrative expenses. Gross profit increased by $255,514, and selling,
general and administrative expenses increased by $188,169.
Other Income, Net
Other income of $62,726 in 1995 was $23,934 or 67% greater than other income of
$35,949 in 1994 due to an increase in interest income from increased amounts
invested and higher rates of return on amounts invested.
Liquidity and Capital Resources
At March 31, 1996 the Company had cash of $1,113,626 as compared to $286,546 at
March 31, 1995. This increase is the result of cash flows from operating and
investing activities. Additionally, at March 31, 1995 the Company had
certificates of deposit and other liquid investments of $205,687.
Operating Activities
The Company had improved operating results due to increased international sales
of its medical electronic devices and an increase in sales of its aqueous
chemical products and a decrease in selling, general and administrative
expenses.
Investing Activities
The Company invested $100,000 in treasury notes, received proceeds of $250,500
from matured treasury notes and $287,287 from principal payments on notes
receivable.
Financing Activities
In 1995 the Company reduced long term liabilities by $2,319.
The Company does not have any material sources of liquidity or unused sources
of liquid assets.
13
Item 7. Financial Statements
ADM TRONICS UNLIMITED, INC.
FINANCIAL STATEMENTS
MARCH 31, 1996
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Statements of Operations F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-14
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
ADM Tronics Unlimited, Inc.
Northvale, New Jersey
We have audited the accompanying consolidated balance sheet of ADM Tronics
Unlimited, Inc. and subsidiaries as of March 31, 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the two years in the period ended March 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ADM Tronics
Unlimited, Inc. and subsidiaries as of March 31, 1996, and the results of their
operations and their cash flows for each of the two years in the period ended
March 31, 1996, in conformity with generally accepted accounting principles.
KAUFMAN, ROSSIN & CO., P.A.
Miami, Florida
June 7, 1996
F-1
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
ASSETS
CURRENT ASSETS
Cash $ 1,113,626
Certificates of deposit 105,390
Security held to maturity 100,297
Accounts receivable - trade, net of allowance
for doubtful accounts of $5,000 200,758
Inventories:
Raw materials and supplies 129,809
Finished goods - chemicals 60,094
Other current assets 172,282
Total current assets 1,882,256
PROPERTY AND EQUIPMENT 48,629
EQUIPMENT HELD FOR SALE OR LEASE, net of accumulated
depreciation of $49,599 463,500
NOTE RECEIVABLE 82,306
EQUITY SECURITIES AVAILABLE FOR SALE 20,000
LOAN RECEIVABLE FROM OFFICER, bearing interest at 3% per annum 68,252
OTHER ASSETS 340,030
TOTAL ASSETS $ 2,904,973
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 58,426
Accrued expenses and other 27,431
Prepayments from customer 124,943
Total current liabilities 210,800
DEFERRED SALES REVENUE 65,860
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY 2,628,313
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,904,973
F-2
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1996 AND 1995
1996 1995
REVENUES
Sales $ 1,839,006 $ 1,556,885
Interest 79,645 62,726
Total revenues 1,918,651 1,619,611
COSTS AND EXPENSES
Cost of sales 602,612 471,742
Selling, general and administrative 992,105 1,016,660
Total costs and expenses 1,594,717 1,488,402
INCOME BEFORE UNREALIZED LOSS ON EQUITY
SECURITIES AVAILABLE FOR SALE AND INCOME
TAX BENEFIT 323,934 131,209
UNREALIZED LOSS ON EQUITY SECURITIES
AVAILABLE FOR SALE 279,000 -
INCOME BEFORE INCOME TAX BENEFIT 44,934 131,209
INCOME TAX BENEFIT 153,000 112,000
NET INCOME $ 197,934 $ 243,209
WEIGHTED AVERAGE NUMBER OF COMMON
AND EQUIVALENT SHARES OUTSTANDING 43,865,782 43,282,739
NET INCOME PER SHARE $ .005 $ .006
F-3
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1996 AND 1995
Unrealized
Loss On
Shares Equity
(44,000,000) Capital in Accumu- Securities
Authorized Par Excess of lated Available
par value Value Par Value Deficit for Sale Total
BALANCES,
MARCH 31, 1994 42,474,907 $21,237 $4,819,436 ($2,653,503) $ - $2,187,170
Unrealized
loss on
equity secur-
ities available
for sale - - - - (258,000) ( 258,000)
Net income - - - 243,209 - 243,209
BALANCES,
MARCH 31, 1995 42,474,907 21,237 4,819,436 ( 2,410,294)(258,000) 2,172,379
Unrealized loss
on equity secu-
rities available
for sale charged
to operations - - - - 258,000 258,000
Net income - - - 197,934 - 197,934
BALANCES,
MARCH 31, 1996 42,474,907 $21,237 $4,819,436 ($2,212,360)$ - $2,628,313
F-4
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 197,934 $ 243,209
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortiza tion 40,935 50,666
Provision for losses on accounts receivable 8,766 90,700
Unrealized loss on equity securities available
for sale 279,000 -
Changes in operating assets and liabilities:
Accounts receivable - trade 159,280 ( 173,586 )
Inventories 1,078 ( 34,550 )
Other current assets ( 121,289 ) ( 137,599 )
Equipment held for sale or lease ( 186,970 ) ( 56,172 )
Accounts payable ( 80,982 ) 66,075
Accrued expenses and other current liabilities 115,988 6,361
Total adjustments 215,806 188,105
Net cash provided by operating activities 413,740 55,104
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in treasury notes ( 100,000 ) ( 300,492 )
Maturities of treasury notes 250,500 347,526
Principal payments on note receivable 287,287 16,605
Purchase of property and equipment ( 2,765 ) ( 10,809 )
Net changes in certificates of deposit ( 4,029 ) ( 2,578 )
Loans to officer - ( 5,000 )
Net increase in other assets ( 15,334 ) ( 92,885 )
Net cash provided by (used in)
investing activities 415,659 ( 47,633 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term liabilities ( 2,319 ) ( 2,742 )
NET INCREASE IN CASH 827,080 4,729
CASH - BEGINNING 286,546 281,817
CASH - ENDING $ 1,113,626 $ 286,546
F-5
ADM TRONICS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of ADM
Tronics Unlimited, Inc. (the Company) and its subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
Organization
The Company is a manufacturer and engineering concern whose
principal lines of business are the production and sale of chemical
products and the manufacturing and sale of medical devices, which
are about equal in size based upon sales. The chemical product line
includes water-based chemical products which are used in the food
packaging and converting industries and are sold to customers
located in various parts of the United States and Europe. The
medical device products are for use in the treatment of joint pain
and, at this point, have been sold primarily to a particular
customer located in Japan (See Sonotron Devices and Segment
Information).
Cash
The Company considers excess operating funds invested in cash
management and money market accounts to be cash. At March 31, 1996
the cash management account was yielding 5.15%. This fund is not
insured by the FDIC.
Equity Securities Available for Sale
The Company considers its investments in equity securities as
available for sale whereby, pursuant to Statement of Financial
Accounting Standards No. 115, unrealized holding gains and
losses, net of tax, were reported as a separate component of
stockholders' equity in the previous period. During the year ended
March 31, 1996, management determined that aggregate declines in
market value of its investment in equity securities were deemed to
be other than temporary. As a result, the Company charged $279,000
to operations.
Security Held to Maturity
The security held to maturity consists of a U.S. Treasury Note and
is stated at cost, which approximated market value at March 31,
1996.
Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of
five to ten years. Leasehold improvements are amortized over the
lease term or useful lives, whichever is shorter.
F-6
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sonotron Devices
Sonotron Devices (Devices) are held for sale or lease internationally
and are included as equipment held for sale or lease on a specific
identification basis. Until clearance to market is obtained from the
FDA, the Devices cannot be marketed in the United States for human
applications, other than for research purposes, and may not be
marketable in certain foreign countries.
Devices are available for sale outright, are available for sale under
terms providing for additional charges based upon usage, and are
available to be leased, with charges based solely upon usage.
Contingent rental revenues are recognized at the time treatments are
released to the lessee. Leased Devices are depreciated over seven
years commencing at the date of lease. Revenues from leasing
activities have not been significant.
Intangible Assets
Patents and other intangible assets are stated at cost, are included
in other assets and are amortized on a straight-line basis over the
shorter of their legal or useful lives.
Reclassifications
Certain amounts in the 1995 financial statements have been
reclassified to conform with the 1996 presentation.
Income Taxes
Deferred income taxes are provided for the estimated tax effect of
temporary differences between financial and taxable income.
Net Income Per Share
Net income per share is computed by dividing net income by the sum of
the number of shares of common stock outstanding during 1996 and 1995
(42,474,907 for both years) and common stock assumed to be
outstanding upon the exercise of all stock options and warrants
(1,390,875 and 807,832, respectively), computed utilizing the
treasury stock method. Fully diluted earnings per share is not
presented as it is not materially different.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F-7
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires the Company to
disclose information regarding fair values of its financial
instruments and the underlying methodology and assumptions used
therein. The following methods and assumptions were used by the
Company in estimating the fair values of its financial instruments:
Certificate of deposit - The carrying amount of the certificate
of deposit approximates fair value due to the short maturity of
the instrument.
Security held to maturity and equity securities available for
sale - Fair values for investment securities are based on quoted
market prices and the securities are stated at market.
Loan receivable from officer - The fair value of the officer loan
is determined by calculating the present value of the note by a
current market rate of interest as compared to the stated rate of
interest. The difference between fair value and carrying value
is not deemed to be significant.
Note receivable - The fair value of amounts due from Arthronix
(see Note 4) is based on future net cash flows the Company
expects to generate by operating the product line relating to
such assets, discounted by an appropriate market rate of
interest. The difference between fair value and carrying value
is not deemed to be significant.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1996 was as follows:
Production equipment $ 43,330
Other machinery and equipment 222,534
Office furniture and fixtures 59,260
Leasehold improvements 131,800
Computer equipment 89,860
546,784
Less accumulated depreciation and amortization ( 498,155 )
$ 48,629
Depreciation and amortization on property and equipment for the years
ended March 31, 1996 and 1995 was $35,100 and $37,914, respectively.
F-8
NOTE 3. INCOME TAXES
The components of income taxes for the years ended March 31, 1996 and
1995, are as follows:
1996 1995
Deferred $ 19,000 $ 57,000
Change in valuation allowance ( 172,000 ) ( 169,000 )
Income tax benefit ($ 153,000 ) ($ 112,000 )
The difference between the income tax benefit and the amount computed
by applying the maximum federal statutory income tax rate of 34% to
income before income tax benefit is as follows:
1996 1995
Tax expense at U.S. statutory
rates $ 15,000 $ 45,000
State income taxes 4,000 12,000
Change in valuation allowance ( 172,000 ) ( 169,000 )
Income tax benefit ($ 153,000 ) ($ 112,000 )
At March 31, 1996, the Company had deferred tax assets of
approximately $595,000 comprised of net operating loss carry forwards
of $490,000 and unrealized declines in market value of securities of
$105,000. The deferred tax assets are offset by a valuation
allowance in the amount of $330,000. The net deferred tax asset of
$265,000 is included in other current assets and other assets in the
accompanying balance sheet at March 31, 1996.
Deferred tax assets, net of a valuation allowance, are recorded when
management believes it is more likely than not that tax benefits will
be realized. The change in the valuation allowance was based upon
the consistent application of management's valuation procedures and
new circumstances surrounding its future realization. The amount of
the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.
The Company and its subsidiaries file consolidated income tax
returns. As of March 31, 1996, the Company had consolidated net
operating loss carryforwards of approximately $1,300,000 that expire
primarily during the years 1997 through 2008.
F-9
NOTE 4. COMMITMENTS AND CONTINGENCIES
Lease
The Company occupies its premises under an operating lease expiring
June 1998 and requiring a monthly rental of $6,780. Minimum annual
payments due under the lease are $81,360 per year through fiscal year
ending March 31, 1998 and $20,340 due in fiscal year 1999,
aggregating a total commitment of $183,060.
Rent expense for the years ended March 31, 1996 and 1995 was $81,348
and $81,360, respectively.
Warranties
Devices are sold under agreements providing for the repair or
replacement of any devices in need of repair, at the Company's cost,
for up to one year from the date of delivery, unless such need was
caused by misuse or abuse of the Devices. At March 31, 1996, no
amount has been accrued for potential warranty costs and such costs
are expected to be nominal.
Arthronix - Note Receivable
In connection with the settlement of a lawsuit with Arthronix
relating to an Ozone Sterilizer (Sterilizer), on July 13, 1993 a
subsidiary and Arthronix entered into an agreement allowing Arthronix
to acquire the Sterilizer for $550,000, payable under two promissory
notes. At March 31, 1996, $300,000 plus accrued interest of
approximately $50,000 was outstanding on such notes and management
determined that Arthronix was in default of the repayment terms. As
the outstanding balance is unsecured and recoverability is uncertain,
at March 31, 1996, the note, plus all accrued interest are offset by
a reserve in the same amount.
Arthronix - Note Receivable 2
In connection with the settlement of a second lawsuit with Arthronix
on November 1, 1993, a subsidiary and Arthronix executed an agreement
providing for, among other things, the execution of a note payable to
the subsidiary for $147,000, collateralized by an interest in
substantially all tangible and intangible assets relating to an
Arthronix product line. In addition, the settlement provided that
upon default of any payment on such note, for a period of 30 days or
more, Arthronix would become liable for approximately $372,000 (the
full pre-settlement amount due the subsidiary), less payments made to
date.
F-10
NOTE 4. COMMITMENTS AND CONTINGENCIES (Continued)
At March 31, 1996, $82,306 was outstanding on this note and
management determined that Arthronix was in default of the payment
terms. On May 30, 1996, the Company commenced legal action to obtain
the tangible and intangible assets collateralizing the note. In the
opinion of the Company's counsel, the Company will likely be
successful in its efforts to obtain such collateral and at March 31,
1996, management determined that the fair value of the assets to be
recovered exceeds the carrying amount of the receivable. Due to the
uncertainties relating to the timing of the recovery of the under-
lying collateral, the Company reclassified the receivable by
recording the full amount due as a non-current asset.
On or about May 10, 1996, Arthronix filed a demand for arbitration
claiming that amounts are due them pursuant to an agreement date
August 25, 1993 (the Agreement) between Arthronix and a subsidiary
and a major customer of the Company which, by its terms, expired on
August 24, 1994. Arthronix has alleged, among other things, breach
of contract, tortious interference, and is seeking punitive and
compensatory damages in an unspecified amount based upon a failure to
execute an extension of such Agreement. Further, Arthronix alleges it
is owed commissions of $51,000 resulting from the sale of Sonotron
devices to the major customer based upon a sales order dated
March 31, 1994. Management deems the claims made by Arthronix to be
without merit and intends to vigorously defend the demand for
arbitration, however, in the opinion of the Company's counsel, the
likelihood of an unfavorable outcome with regard to these allegations
cannot presently be determined.
Distribution Agreement
On June 8, 1995 a subsidiary finalized an exclusive distribution
agreement with a major customer providing for, among other things,
the sale and distribution of approximately $4.9 million of devices
over five years commencing April 2, 1995, in the territory
encompassing Japan, Singapore and Malaysia. The terms of the
agreement provide for a 12.5% prepayment on any purchase order and
full payment prior to delivery, on a shipment by shipment basis. At
March 31, 1996, $124,943 of such prepayments relating to unshipped
devices is included in current liabilities while during the fiscal
year ended March 31, 1996, the Company shipped approximately $800,000
in devices under this agreement.
NOTE 5. COMMON STOCK
Options
From time to time, the Company grants stock options to directors,
officers and key employees of the Company. Each option is
exercisable for five years from the date of grant. At March 31,
1996 and 1995 there were options outstanding for 1,777,229 shares,
with an exercise price of $.18 per share, expiring February 28,
1997. No options were granted or exercised during 1996 or 1995.
At March 31, 1996, warrants to acquire up to 3,750,000 shares of
common stock at $.50 per share were outstanding and such warrants
expired on June 23, 1996. No warrants were exercised during 1996 or
1995.
F-11
NOTE 6. MAJOR CUSTOMERS, CREDIT CONCENTRATION, EXPORT SALES AND
SEGMENT INFORMATION
Major Customers
Sales to individual unaffiliated customers in excess of 10% of net
sales to unaffiliated customers are shown below.
Year Ended March 31,
1996 1995
Chemical Segment:
Customer A $ 316,469 $ 193,347
Medical Segment:
Customer B 814,000 606,193
Credit Concentrations
The Company sells chemicals primarily to the printing and packaging
industry (see Item 1(c) - Narrative Description of Business elsewhere
herein for additional information).
The Company maintains account balances and certificates of deposit in
a financial institution in excess of federally insured limits.
Export Sales
For the years ended March 31, 1996 and 1995, export sales were
approximately $890,000 and $695,000, respectively.
Segment Information
The Company operates in two industry segments - the production and
sale of chemicals and the manufacture and sale or lease of medical
products.
F-12
NOTE 6. MAJOR CUSTOMERS, CREDIT CONCENTRATION, EXPORT SALES AND
SEGMENT INFORMATION (Continued)
Information about segment operations follows:
Chemical Medical Consolidated
Year Ended March 31, 1996
Net sales - unaffiliated
customers $ 947,067 $ 891,939 $ 1,839,006
Income from operations* $ 11,118 $ 233,171 $ 244,289
Identifiable assets $2,166,696** $ 738,277 $ 2,904,973
Depreciation and
amortization $ 24,979 $ 15,956 $ 40,935
Capital expenditures $ 2,765 $ - $ 2,765
Year Ended March 31, 1995
Net sales unaffiliated
customers $ 852,748 $ 704,137 $ 1,556,885
Income from operations* $ 46,388 $ 22,095 $ 68,483
Identifiable assets $1,223,111** $1,193,241 $ 2,416,352
Depreciation and
amortization $ 24,837 $ 25,829 $ 50,666
Capital expenditures $ 10,809 $ - $ 10,809
* Excludes interest, income tax benefit, and loss on securities
available for sale.
** Includes short term investments, officer loans, and deferred
tax asset.
NOTE 7. SIGNIFICANT TRANSACTION
Florida License and Management Agreement
In June 1992, a subsidiary of the Company granted an exclusive
license to distribute the Device for veterinary use in Florida in
exchange for shares of common stock of the publicly-held parent of
the licensee. Such shares were issued on March 31, 1993, in an
amount intended to equal $172,500 of market value (before discounts
for restrictions on resale and other factors) based upon the mean of
the last reported high bid and low asked prices as of March 16,
1993. In connection with this license, the subsidiary is committed
to supply four Devices set for 3,000 treatment units each;
additional Devices are to be supplied as requested, each set for
2,400 treatment units; additional treatment units up to 88,000 are
to be sold to the licensee at below current market prices and the
subsidiary is to provide all required training, which is expected to
be nominal. At March 31, 1996 no devices have been supplied.
F-13
NOTE 7. SIGNIFICANT TRANSACTION (Continued)
Also in June 1992, the licensee was granted, under a management
agreement with a subsidiary, the rights to capitalize, open and
operate Company clinics in certain Florida counties, using the Device
for human use, in exchange for shares of common stock of the
publicly-held parent of the licensee. Such shares were issued on
March 31, 1993 in an amount intended to equal $575,000 of market
value (before discounts for restrictions on resale and other
factors), as above. In connection with this license, the subsidiary
is committed to supply two Devices set for 3,000 treatment units
each; additional devices are to be provided upon the opening of a
second clinic, each set for 1,200 treatment units; additional units
up to 194,000 are to be sold to the licensee at amounts intended to
be below current market prices and the Subsidiary is to provide all
required training, which is expected to be nominal. Thereafter, the
licensee, at its sole expense, is to retain all revenues, except for
an agreed upon amount per treatment unit. Upon notification of FDA
clearance to market the Devices in the United States, the licensee
may purchase each clinic for $3,000 less the licensee's costs to open
and operate the clinic. At March 31, 1996, no clinics have been
opened and no devices have been supplied.
At March 31, 1996 the investment in common stock of the publicly-held
parent of the licensee is included as equity securities available for
sale and the Company's obligation to provide devices and treatment
units is reflected as deferred sales revenue.
NOTE 8. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
The Company charged $279,000 to operations relating to management's
determination that the decline in market value of equity securities
available for sale was other than temporary.
Included in the net income tax benefit of approximately $153,000 is
an adjustment made primarily to reduce the deferred tax asset
valuation allowance.
The effect of the above adjustments decreased net income by $126,000.
F-14
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
(a) The disclosure has been previously reported as that term is
defined in Rule 12b-2 under the Securities Exchange Act of 1934.
(b) Not applicable.
13
PART III
Item 9.
I. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
(a) Identification of Executive
Officers and Directors
Name Age Position
Dr. Alfonso Di Mino 76 President, Chief Executive
Officer and Director
Vincent Di Mino 70 Vice President of
Production and Director
Andre' Di Mino 40 Executive Vice President,
Secretary, Treasurer, Chief
Operating Officer and
Director
Dr. Alfonso Di Mino has been President and a Director of the Company since
1969.
Vincent Di Mino has been Vice President of Production since 1969 and a
Director of the Company since 1987.
Andre' Di Mino has been Executive Vice President and Chief Operating
Officer since 1987 and Secretary and Treasurer of the Company since 1978.
Mr. Di Mino has been a Director of the Company since 1987.
(b) Identify Significant Employees
Not Applicable.
(c) Family Relationships
Dr. Alfonso Di Mino is the father of Andre' Di Mino and the brother of
Vincent Di Mino. There are no other family relationships between any of the
Company's directors or executive officers.
(d) Involvement in Certain Legal Proceedings
During the last five years, none of the following events occurred with
respect to any executive officer or director of the Company as of the date
hereof.
14
(i) Any bankruptcy petition was filed by or against any business
of which such person was a general partner or an executive officer at or within
two years before the time of such filing;
(ii) Any conviction in a criminal proceeding or being subject of
a pending criminal proceeding (excluding traffic violations and other minor
offenses);
(iii) Being subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdic-tion, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and
(iv) Being found by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.
(g) Promoters and Control Persons
Not Applicable.
II. Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(a) under the Exchange Act
during the Company's most recent fiscal year and Forms 5 and amendments thereto
furnished to the Company with respect to its most recent fiscal year, and any
written responses referred to in subparagraph (b)(2)(i) of Item 405 of
Regulation S-B, no person who at any time during the fiscal year ended
March 31, 1996 was a director, officer, to the knowledge of the Company a
beneficial owner of more than 10% of any class of equity securities of the
Company registered pursuant to Section 12 of the Exchange Act, failed to file
on a timely basis, as disclosed in Forms 3, 4 and 5, reports required by
Section 16(a) of the Exchange Act during the most recent fiscal year or prior
fiscal years.
Item 10. Executive Compensation
The following table (the "Summary Table") sets forth all plan and non-plan
compensation amended to, earned by, or paid to (i) the Company's chief
executive officer and (ii) the Company's four most highly compensated executive
officers other than the chief executive officer who served as such on March 31,
1996 and whose total annual salary and bonus exceeded $100,000 (the "Named
Officers"):
15
Name and Principal Fiscal Year Annual Compensation
Position Ended Salary Other Compensation
March 31
Dr. Alfonso Di Mino, 1996
President and Chief
Executive Officer
1996
1995 $85,000 $-0-
1994 $85,000 $-0-
On March 31, 1996, the value of unexercised in-the-money options held by
Dr. Di Mino with respect to 515,741 shares of the Company's Common Stock was
$41,259. All of such options are exercisable. No options were exercised by
Dr. Di Mino or granted to Dr. Di Mino during the fiscal year ended March 31,
1996.
During the fiscal years ended March 31, 1996, 1995 and 1994, no other
compensation not otherwise referred to herein was paid or awarded by the
Company to any individual named in the Summary Table, the aggregate amount of
which compensation, with respect to any such person, exceeded the lesser of
$50,000 or 10% of the annual salary and bonus reported in the Summary Table for
such person.
There are no standard or other arrangements pursuant to which any
director of the Company is or was compensated during the Company's last fiscal
year for services as a director, for committee participation or special
assignments.
The Company has no employment contract with any person named in the
Summary Table.
The Company does not have any compensatory plan or arrangement,
including payments to be received from the Company with respect to any person
named in the Summary Table, which plan or arrangement results or will result
from the resignation, retirement or any other termination of such person's
employment with the Company and its subsidiaries or from a change in control of
the Company or a change in such person's responsibilities following a change
in control and the amount involved, including all periodic payments or
installments, exceeds $100,000.
16
Item 11. Security Ownership of Certain Beneficial
Owners and Management
(a), (b)
The following table sets forth certain information as of June 24,
1996 with respect to any person who is known to the Company to be the
beneficial owner of more than 5% of any class of its voting securities and as
to each class of the Company's equity securities beneficially owned by its
directors and directors and officers as a group:
Title Name and Address Amount Approximate
of of Beneficial of Percent
Class Owner Beneficial of
Ownership Class
Common Dr. Alfonso Di Mino 2,949,980(1) 7(1)
Stock, 224-S Pegasus Ave. shares
$.0005 Northvale, NJ 07647
par value
Common Andre' Di Mino 8,049,774(2) 19(2)
Stock, 224-S Pegasus Ave. shares
$.0005 Northvale, NJ 07647
par value 1,700,000(3) 4(3)
shares
3,400,000(4) 8(4)
shares
Common Vincent Di Mino 2,387,928(5) 6(5)
Stock, 224-S Pegasus Ave. shares
$.0005 Northvale, NJ 07647
par value
5,100,000(6) 12(6)
shares
Common The American Heritage 4,250,000 10
Stock, Fund, Inc. shares
$.0005 1370 Ave. of the Americas
par value New York, N.Y. 10019
Common Officers and Direc- 18,487,682(7) 42(7)
Stock, tors as a group shares
$.0005 (three persons)
par value
______________________________
(1) Represents (a) 804,239 shares of Common Stock directly owned by
Dr. Di Mino, (b) 1,000,000 shares of Common Stock beneficially owned
by the spouse of Dr. Di Mino, in
17
which shares Dr. Di Mino disclaims any beneficial ownership, and (c) 1,630,000
shares of Common Stock, which includes the 1,000,000 shares described in (b)
above, subject to an agreement dated July 8, 1987 pursuant to which Dr. Di Mino
has the power to vote such shares and (d) 515,741 shares of the Company's
Common Stock which may be acquired by Dr. Di Mino upon the exercise of options.
(2) Represents (a) 7,672,696 shares of Common Stock directly owned by
Mr. Di Mino and (b) 377,078 shares of the Company's Common Stock
which may be acquired by Mr. Di Mino upon the exercise of options.
(3) Represents 1,700,000 shares of Common Stock held by the Andre'
Di Mino Irrevocable Trust, a Trustee and the beneficiary of which is
Andre' Di Mino who may be deemed to be a beneficial owner of the
shares held by such Trust.
(4) Represents 1,700,000 shares of Common Stock held each by the
Maria Elena Di Mino and Maurice Di Mino Irrevocable Trusts, a Trustee
of which is Andre Di Mino who may be deemed to be a beneficial owner
of the shares held by such Trusts by reason of his power to vote such
shares.
(5) Represents (a) 1,287,928 shares of Common Stock directly owned by
Mr. Di Mino, (b) 300,000 shares of Common Stock beneficially owned by
the spouse of Vincent Di Mino, (c) 300,000 shares of Common Stock
owned by the child of Mr. Di Mino who resides in his home, in all of
which shares set forth in (b) and (c) of this Note (5) Mr. Di Mino
disclaims any beneficial ownership and (d) 500,000 shares of the
Company's Common Stock which may be acquired by Mr. Di Mino upon the
exercise of options.
(6) Represents 5,100,000 shares of Common Stock of which 1,700,000 such
shares are held by each of the Andre' Di Mino Irrevocable Trust, the
Maria Elena Di Mino Irrevocable Trust and the Maurice Di Mino
Irrevocable Trust. Vincent Di Mino, a Trustee of each of such Trusts,
may be deemed to be a beneficial owner of the shares held by such
Trusts by reason of his power to vote such shares.
(7) See Notes above.
(c) Changes in Control
The Company is not aware of any arrangement which may result
in a change in a control of the Company.
18
Item 12. Certain Relationships and Related Transactions
(a) On June 23, 1993 the Company sold 4,250,000 shares of its Common
Stock and a Common Stock Purchase Warrant (the "Warrant") to The American
Heritage Fund, Inc. ("AHF") for $1,000,000. The holder of the Warrant has the
right to purchase 3,750,000 shares of the Company's Common Stock at a price of
$.375 per share until June 23, 1995 and thereafter at $.50 per share until
June 23, 1996 at which time the Warrant expires. The Company has registered the
shares purchased by AHF, the Warrant and the shares of Common Stock underlying
the Warrant under the Securities Act of 1933.
From time to time, the Company has loaned money to Andre' Di Mino at an
interest rate of 3% per annum. Reference is made to the responses to items 9
and 11 hereof. The largest aggregate amount of indebtedness, including
interest, outstanding at any time since the beginning of the Company's fiscal
year ended March 31, 1996 was approximately $68,000 which was also the
approximate amount of principal and interest outstanding as of June 24, 1996.
Other than as otherwise set forth herein, during the last two fiscal years
there was no transaction or proposed transaction to which the Company was or is
to be a party, in which any of the following persons had or is to have a direct
or indirect material interest and the amount involved in the transaction or a
series of similar transactions exceeded $60,000:
(1) Any director or executive officer of the Company;
(2) Any nominee for election as a director;
(3) Any securityholder named in response to Item 11 hereof; and
(4) Any member of the immediate family (including spouse,
parents, children, siblings and in-laws) of any person named
in paragraphs (1), (2) or (3) of this Item 12(a).
(b) Not applicable.
(c) Not applicable.
Item 13. Exhibits and Reports of Form 8-K
(a) Exhibits
3(a) Articles of Incorporation, as amended. Exhibit 3(a) to the
Company's Registration Statement on Form 10, File No. 0-17629 (the "Form 10"),
is hereby incorporated by reference.
3(b) By-Laws. Exhibit 3(b) to the Form 10 is hereby incorporated
by reference.
4. Warrant of June 23, 1993 issued to The American Heritage Fund,
Inc. Exhibit 4 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended March 31, 1993 is hereby
incorporated by reference.
19
9. Trust Agreements of November 7, 1980 by and between
Dr. Alfonso Di Mino et al. Exhibit 9 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended March 31, 1993
is hereby incorporated by reference.
10(a) Memorandum of Lease by and between the Company and Cresskill
Industrial Park III dated as of August 26, 1993. Exhibit 10(a)
to the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1994 is hereby incorporated by reference.
10(b) Agreement of July 8, 1987 by and between Donna Di Mino,
Dr. Alfonso Di Mino, et al. Exhibit 10(q) to the Company's
Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1993 is hereby incorporated by reference.
10(c) Agreement of July 13, 1993 by and between ADM Medical Ventures
Corporation and Arthronix, Inc. Exhibit 10(r) to the Company's
Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1993 is hereby incorporated by reference.
10(d) Agreement of June 9, 1992 by and between Advent Medical
Technology, Inc. and Arthritic Relief Centers, Inc. Exhibit 2
to the Company's Current Report on Form 8-K dated June 9, 1992
is hereby incorporated by reference.
10(e) Agreement of June 9, 1992 by and between Advent Medical
Technology, Inc. and Vet Sonotron Systems, Inc. Exhibit 3 to
the Company's Current Report on Form 8-K dated June 9, 1992 is
hereby incorporated by reference.
10(f) Stock Purchase Agreement and Registration and Rights Agreement
(undated) by and between The American Heritage Fund, Inc. and
the Company. Exhibit 10(i) to the Company's Annual Report on
Form 10-KSB for the fiscal year ended March 31, 1993 is hereby
incorporated by reference.
10(g) Amendment to Agreement of March 16, 1993 by and between
Arthritic Relief Centers, Inc. and Advent Medical Technology,
Inc. Exhibit 10(k) to the Company's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1993 is hereby
incorporated by reference.
10(h) Voting Agreement of March 16, 1993 by and between Vet Sonotron
Systems, Inc. and Advent Medical Technology, Inc. Exhibit
10(l) to the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1993 is hereby incorporated by
reference.
10(i) Voting Agreement of March 16, 1993 by and between Arthritic
Relief Centers, Inc. and Advent Medical Technology, Inc.
Exhibit 10(m) to the Company's Annual Report on Form 10-KSB
for the fiscal year ended March 31, 1993 is hereby
incorporated by reference.
20
21 Subsidiaries of the Company. Exhibit 22 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1992 is hereby incorporated by reference.
23 Consent of Independent Certified Public Accountants.
27 Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable
21
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ADM TRONICS UNLIMITED, INC.
(Company)
By:\s\Dr. Alfonso Di Mino
President
Dated: June 28, 1996
In accordance with the Exchange Act this report has been signed below by
the following persons on behalf of the Company and in the capacities and on the
dates indicated:
By:\s\Dr. Alfonso Di Mino, Principal
Executive Officer and Director
Dated: June 28, 1996
By:\s\Andre' Di Mino, Principal Fin-
ancial and Accounting Officer
and Director
Dated: June 28, 1996
By:\s\Vincent Di Mino, Director
Dated: June 28, 1996
22
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 of our report dated June 7, 1996, relating to the
financial statements of ADM Tronics Unlimited, Inc. which appears on Page F-1
in their Form 10-KSB for the year ended March 31, 1996.
\s\KAUFMAN, ROSSIN & CO., P.A.
Miami, Florida
July 1, 1996
23
