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, 1998
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 Jurisd- (I.R.S. Employer Identifi-
iction of Incorporation cation Number)
or organization)
224-S Pegasus Avenue, Northvale, New Jersey 07647
(Address of Principal Executive Offices)
Registrant's Telephone Number, including
Area Code: (201) 767-6040
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
the filing requirements for at least the past 90 days:
YES X NO______
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
46,649,907 shares of Common Stock, $.0005 par value,
as of November 12, 1997
ADM TRONICS UNLIMITED, INC.
INDEX
Part I. Financial Information Page Number
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets - September 30, 1998 and
March 31, 1998 2
Consolidated Statements of Operations - For The Three
Months Ended September 30, 1998 and 1997 and For The
Six Months Ended September 30, 1998 and 1997 3
Consolidated Statements of Changes in Stockholders'
Equity - For The Six Months Ended September 30, 1998 4
Consolidated Statements of Cash Flows - For The Six
Months Ended September 30, 1998 and 1997 5
Notes To Consolidated Financial Statements 6
Item 2. Management's Discussion And Analysis of Financial
Condition and Results of Operations 7-8
1
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
1998 1998
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 611,198 1,127,847
Accounts receivable--trade less allowance
for doubtful accounts of $20,500 325,095 317,888
Inventories:
Raw materials and supplies 257,224 261,000
Finished goods--chemicals 66,251 59,535
Other current assets 28,189 24,101
Total Current Assets 1,287,957 1,790,371
Property and Equipment 182,219 75,833
Equipment in use and underlease agreements,
net of accumulated depreciation of $71,705
and $60,164, respectively 371,260 82,415
Equipment held for sale 1,342,422 302,218
Loan receivable from officer, bearing
interest at 3% per annum 67,454 59,502
Other Assets 506,538 523,309
Total Assets $ 3,757,850 $2,833,648
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade 151,104 397,338
Accrued expenses and other 49,224 46,139
Notes payable - current 97,920 110,842
Total Current Liabilities 298,248 554,319
Notes payable - non-current 34,147 48,676
Stockholders' Equity 3,425,455 2,230,653
Total Liabilities & Stockholders' Equity $3,757,850 $2,833,648
See accompanying notes to consolidated financial statements
2
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
Revenues:
Net sales $ 445,281 $ 292,048 $1,001,103 $ 569,109
Costs And Expenses:
Cost of sales 221,547 119,934 497,417 247,807
Selling, general and 327,884 297,676 679,192 588,425
administrative
Total cost and expenses 549,431 417,610 1,176,609 836,232
Operating Income(loss) ($ 104,150) ($ 125,562) ($ 175,506) ($267,123)
Other Income: 9,207 13,908 20,308 24,145
Net Income (loss) ($ 94,943) ($ 111,654) ($155,198) ($242,978)
Net income (loss) per
common share (0.002) (0.003) (0.003) (0.006)
See accompanying notes to consolidated financial statements.
3
ADMTRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
Common Capital In
Stock Par Excess Of Accumulated
Shares Value Par Value Deficit Total
Balance,
March 31, 1998 43,724,907 21,862 5,137,176 (2,928,385) 2,230,653
Issuance of
common stock 3,071,000 1,535 1,348,465 1,350,000
Net income (loss)
Six months ended
September 30, 1998 (155,198) (155,198)
Balance
September 30, 1998 46,795,907 23,397 6,485,641 (3,083,583) 3,425,455
See accompanying notes to consolidated financial statements
4
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
1998 1997
Cash Flows From Operating Activities:
Net income(loss) ($ 155,198) ($ 242,978)
Adjustments to reconcile net income(loss)
to net cash flows from operating activities:
Depreciation and amortization 42,578 11,165
Changes in operating assets and liabilities:
Accounts receivable--trade (7,207) 49,643
Inventories (2,940) 15,834
Other current assets (4,088) 4,138
Equipment in use or under lease 5,015 0
Equipment held for sale or lease 76,796 (13,096)
Net change in other assets (701) (49,123)
Accounts payable--trade (246,234) 52,836
Accrued expenses and prepayments
from customers 3,085 (72,316)
Net cash flows provided by (used in)
operating activities (288,894) (243,897)
Cash Flows From Investing Activities:
Purchases of property and equipment (14,352) (5,958)
Acquisition of SofPulse assets (178,000) 0
Down payment for purchase of stock of
Precision Assembly Corporation 0 (1,000)
Loan to officer net of repayments (7,952) 4,600
Net changes in certificates of deposit 0 107,000
Net cash flows provided by (used in)
investing activities (200,304) 104,642
Cash Flows From Financing Activities:
Additional borrowings of notes payable, net (27,451) 0
Net cash flows provided by (used in)
financing activities (27,451) 0
Net change in cash and cash equivalents (516,649) (139,255)
Cash and cash equivalents--
Beginning of period 1,127,847 1,174,965
Cash and cash equivalents--
End of period 611,198 1,035,710
Supplemental disclosure of
Cash flow activities:
Interest paid 4,900 0
Non-cash investing and financing activities:
Fair value of assets acquired relating to
SofPulse assets 1,528,000 0
Common stock issued in connection with
acquisition of SofPulse assets 1,350,000 0
See accompanying notes to consolidated financial statements.
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,
1998 (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 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. - Pro forma
On August 18, 1998 the Company purchased certain assets from Electropharma-
cology, Inc. ("EPI") including, but not limited to, a number of SofPulse (the
"Device") medical devices along with certain manufacturing equipment, marketing
rights, patents and other items associated with the Devices, in exchange for
$150,000 and the issuance of 2,925,000 shares of the Company's common stock.
Unaudited pro forma results of operations, assuming the acquisition of the
SofPulse business occurred as of the beginning of the six month periods
ending September 30, 1998 and 1997, after giving effect to certain adjustments
such as additional depreciation and a consulting agreement resulting from the
acquisition was as follows. The pro forma summary does not necessarily reflect
the results of operations as they would have been if the companies had
constituted a single entity during such periods.
(Unaudited) (Unaudited)
September 30, 1998 September 30, 1997
Revenues $ 1,311,209 $ 1,749,947
Net loss $(12,397,838) $ (1,048,768)
Loss per share $ (.26) $ (.02)
Included in the net loss for the six months ended September 30, 1998 are
expenses associated with EPI's reorganization, more specifically, the following:
a $7,500,000 in-process research and development expense representing an
up-front license fee that EPI paid for the acquisition of technology;
a $4,000,000 in-process research and development expense associated with the
acquisition of two biotechnology companies acquired by EPI during the period.
6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1998 the Company had cash and certificates of deposit of
$611,198 as compared to $1,127,847 at March 31, 1998. This decrease was
the result of net cash flows used in operating activities, investing
activities and financing activities.
Operating Activities
Net cash flows used increased $44,997 to ($288,894) for the six months
ended September 30, 1998 as compared to net cash flows of ($243,897) for six
months ended September 30, 1997. This increase was primarily the result of
significant payments to accounts payable offset by a reduction in the operating
loss for the period ended September 30, 1998.
Investing Activities
Capital expenditures consisted of $178,000 for the acquisition of the SofPulse
assets coupled with purchases of property and equipment of $14,352.
Financing Activities
The Company repaid $27,451 in notes payable.
The Company does not have any material external sources of liquidity or
unused sources of funds.
Results of Operations
Quarter Ended September 30, 1998
Revenues
Revenues were $445,281 in 1998 as compared to $292,048 in 1997 representing an
increase of $153,233 or 53%. Revenues from the Company's medical electronics
activities increased $235,733 from revenues realized from acquisitions offset
by a decrease in chemical revenues of $82,500.
Gross Profit
Gross profit of $223,734 in 1998 as compared to $172,114 in 1997 was
$51,620, or 30%, above the gross profit in 1997. Gross profit was 50% of
revenues in 1998 as compared with 59% of revenues in 1997. The reduction in
gross profit margin was due primarily to the product mix of sales with
increased sales of products with a lower gross margin.
Operating Income(Loss)
Operating loss in 1998 was ($104,150) compared to ($125,562) in 1997. Selling
general and administrative expenses increased by $30,208 primarily due to
increased legal and administrative expenses related to the arbitration with
Arthronix.
Other Income
Other income in 1998 was $9,207 as compared to $13,908, a reduction of $4,701,
due to a decrease in interest income from reduced amounts invested.
7
Results of Operations
Six Months Ended September 30, 1998
Revenues
Revenues were $1,001,103 in 1998 as compared to $569,109 in 1997 representing
an increase of $431,994 or 76%. Revenues from the Company's medical electronics
activities increased $513,069 from revenues realized from acquisitions offset
by a reduction in chemical revenues of $81,075.
Gross Profit
Gross profit of $503,686 in 1998 as compared to $321,302 in 1997 was $182,384,
or 57% above the gross profit in 1997. Gross profit was 50% of revenues in
1998 and 57% 1997. The reduction in gross profit is due to the mix in
product sales with higher sales of products with a lower gross margin.
Operating Income(Loss)
Operating loss was ($175,506) in 1998 compared to ($267,123) in 1997. Selling,
general and administrative expenses increased by $90,767 due to increased legal
and administrative expenses related to arbitration with Arthronix,
Other Income
Other income of $20,308 in 1998 decreased $3,837 from $24,145 in 1997,
due to a decrease in interest income from reduced amounts invested.
8
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.
By:\s\Alfonso DiMino
Dr. Alfonso DiMino
President and
Chief Executive Officer
And By:\s\Andre' DiMino
Andre' DiMino
Principal Financial Officer
Dated: Northvale, New Jersey
November 19, 1998
