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 December 31, 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 Small Business Issuer 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)
Issuer's Telephone Number: (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 preceding 12 months
(or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days:
YES X NO______
State the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date:
47,406,652 shares of Common Stock, $.0005 par value,
as of February 18, 1999
ADM TRONICS UNLIMITED, INC.
INDEX
Part I. Financial Information Page Number
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 1998 and
March 31, 1998 2
Consolidated Statements of Operations - For The Three
Months Ended December 31, 1998 and 1997 3
Consolidated Statements of Operations - For The Nine
Months Ended December 31, 1998 and 1997 3
Consolidated Statement of Changes in Stockholders'
Equity - For The Nine Months Ended December 31, 1998 4
Consolidated Statements of Cash Flows - For The Nine
Months Ended December 31, 1998 and 1997 5
Notes To Consolidated Financial Statements 6
Item 2. Management's Discussion And Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information 8
1
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED BALANCE SHEETS
December 31, March 31,
1998 1998
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 567,153 1,127,847
Accounts receivable--trade less
allowance for doubtful accounts of
$46,000 and $20,500, respectively 439,917 317,888
Inventories:
Raw materials and supplies 316,988 261,000
Finished goods 59,595 59,535
Other current assets 101,196 24,101
Total Current Assets 1,484,849 1,790,371
Property and Equipment 188,050 75,833
Equipment in use and under lease
agreements, net of accumulated
depreciation of $86,079 and
$60,164, respectively 337,837 82,415
Equipment held for sale 1,341,844 302,218
Loan receivable from officers, bearing
interest at 3% per annum 67,498 59,502
Other Assets 497,833 523,309
Total Assets $ 3,917,911 $2,833,648
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade 251,015 397,338
Accrued expenses and other 58,084 46,139
Notes payable - current 134,687 110,842
Total Current Liabilities 443,786 554,319
Notes payable - non-current 26,883 48,676
Stockholders' Equity 3,447,242 2,230,653
Total liabilities and stockholders'
equity $3,917,911 $2,833,648
See accompanying notes to consolidated financial statements
2
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
1998 1997 1998 1997
Revenues $ 631,405 $ 358,580 $1,632,508 $ 927,689
Costs And Expenses:
Cost of sales 290,096 184,527 787,513 432,334
Selling, general and 450,988 223,533 1,214,133 811,958
administrative
Total costs and expenses 741,084 408,060 2,001,646 1,244,292
Operating income (Loss) ($ 109,679) ($ 49,480) ($ 369,138)($ 316,603)
Other Income:
Interest, net of expense 8,919 13,302 29,227 37,447
and other income
Net Income (loss) ($ 100,760) ($ 36,178) ($ 339,911)($ 279,156)
Net Income (loss) per (0.002) (0.001) (0.007) (0.007)
common share
See accompanying notes to consolidated financial statements.
3
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 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 3,745,000 1,872 1,594,628 1,596,500
Repurchase of
common stock (63,255) (32) (39,968) (40,000)
Net income (loss)
nine months ended
December 31,1998 (339,911) (339,911)
Balance
December 31,1998 47,406,652 23,702 6,691,836 (3,268,296) 3,447,242
See accompanying notes to consolidated financial statements
4
ADM TRONICS UNLIMITED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Nine Months Ended December 31,
1998 1997
Cash Flows From Operating Activities:
Net income(loss) ($ 339,911) ($ 279,156)
Adjustments to reconcile net income (loss)
to net cash flows from operating activities:
Depreciation and amortization 80,067 18,155
Stock issued for services 98,536 -
Changes in operating assets and liabilities:
Accounts receivable--trade (122,029) 16,168
Inventories (56,048) 48,547
Other current assets 70,869 6,885
Equipment in use or under lease 22,070 -
Equipment held for sale 77,374 (7,689)
Net change in other assets (1,248) (49,696)
Accounts payable--trade (146,323) (42,951)
Accrued expenses and prepayments
from customers 11,945 (64,320)
Net cash flows provided by (used in)
operating activities (304,698) (354,057)
Cash Flows From Investing Activities:
Purchase of property and equipment (32,052) (5,958)
Acquisition of SofPulse business (178,000) -
Down payment for purchase of stock of
Precision Assembly Corporation - (53,000)
Cash balance of company acquired - 8,851
Pepurchase of common stock (40,000) -
Loan to officer, net of repayments (7,996) 7,200
Net changes in certificates of deposit - 6,817
Net cash flows provided by (used in)
investing activities (258,048) (36,090)
Cash Flows From Financing Activities:
Additional borrowings of notes payable, net 2,052 2,072
Net cash flows provided by (used in)
financing activities 2,052 2,072
Net change in cash and cash equivalents (560,694) (388,075)
Cash and cash equivalents
-Beginning of year 1,127,847 1,174,965
Cash and cash equivalents
-End of period 567,153 786,890
Supplemental disclosure of cash flow activities:
Interest paid 7,384 -
Non-cash investing and financing activities:
Fair value of assets acquired realting to
SofPulse business 1,605,135 -
Common stock issued in connection with
acquisition of SofPulse business 1,427,135 -
Common stock issued in connection with
consulting agreements 169,365 -
Fair value of assets received in connection
with acquisition of Precision Assembly
Corporation - 309,272
Fair value of liabilities assumed in
connection with acquisition of Precision
Assembly Corporation - 327,184
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 - Acquisition of SofPulse
On August 18, 1998 the Company purchased certain assets from Electro-
pharmacology, 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 nine month periods
ending December 31, 1998 and 1997, after giving effect to certain adjustments
such as additional depreciation and a consulting agreement resulting from the
acquisition were 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)
December 31, 1998 December 31, 1997
Revenues $ 2,128,059 $ 2,913,352
Net loss $(12,923,744) $ (1,350,975)
Loss per share $ (.27) $ (.03)
Included in the net loss for the nine months ended December 31, 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.
Note 3 - Repurchase of Common Stock
As part of the agreement dated May 27, 1998 between the Company, EPI and Jones,
Day, Reavis & Pogue, ADM agreed that if the common stock issued to Jones, Day in
said agreement, was not registered under the Securities Act and under applicable
state securities laws by October 17, 1998, then on that day and on each thirty
day anniversary until the common stock is so registered, if timely requested
by Jones, Day, ADM will purchase from Jones, Day for $20,000 a number of shares
of common stock equal to 20,000 divided by the then current value per share as
determined in accordance with the asset purchase agreement. ADM's obligation
to purchase shares of common stock from Jones, Day is limited to an aggregate
purchase price of $60,000 if registration has not occurred due to circumstances
not reasonably within the control of ADM. As of december 31, 1998, ADM
purchased 63,255 shares from Jones, Day, as timely requested, on two anniversary
dates for $40,000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At December 31, 1998 the Company had cash and certificates of deposit of
$567,153 as compared to $1,127,847 at March 31, 1998. This decrease was
principally due to cash flows used in operating activities and cash used for
the acquisition of the SofPulse business.
Operating Activities
Net cash flows decreased $172,619 to ($560,694) for the nine months ended
December 31, 1998 as compared to ($388,075) for the nine months ended
December 31, 1997. This decrease was primarily due to cash used
in operating activities of $304,698 and cash used in investing activities of
$258,048.
Investing Activities
Investing activities consisted of cash used for the SofPulse acquisition of
$178,000, purchases of property and equipment of $32,052, repurchases of
common stock, $40,000 and additional net borrowings by an officer of the
Company of $7,996.
Financing Activities
The Company was provided $2,052 from additional borrowings, net of repayments.
The Company does not have any material external sources of liquidity or
unused sources of funds.
6
Results of Operations
Quarter Ended December 31, 1998
Revenues
Revenues were $631,405 in 1998 as compared to $358,580 in 1997 representing
an increase of $272,825 or 76.1%. The increase in revenues was primarily
from the SofPulse rental and sales activities, which increased by $171,149,
coupled with an increase in chemical revenues of $41,772.
Gross Profit
Gross profit of $341,309 in 1998 was $167,256, or 96.1%, above the gross
profit in 1997. Gross profit was 54.1% of revenues in 1998 as compared with
48% of revenues in 1997. The higher gross profit percentage was due to the
revenues from the SofPulse business which has a higher gross profit margin.
Operating Income (Loss)
Operating loss of $109,679 in 1998 was $60,199 above the operating loss of
$49,480 in 1997. Selling general and administrative expenses increased by
$227,455.
Other Income
Other income of $8,919 in 1998 decreased by $4,383, or 32.9%, from $13,302 in
1997, principally due to a decrease in interest income from reduced amounts
invested.
Results of Operations
Nine Months Ended December 31, 1998
Revenues
Revenues were $1,632,508 in 1998 as compared to $927,689 in 1997 representing
an increase of $704,819 or 76%. Chemical revenues decreased $39,303 and the
Company's revenues from the sales and rentals of medical equipment increased
by $744,122.
Gross Profit
Gross profit of $844,995 in 1998 was $349,640 or 71% higher than the gross
profit in 1997. Gross profit was 52% of revenues in 1998 as compared with 54%
of revenues in 1997. The lower gross profit percentage was due to the product
mix of sales with higher sales volume of products with a lower gross profit
margin.
Operating Income (Loss)
Operating loss of $369,138 in 1998 was $52,535 above the operating loss
of $316,603 in 1997. Selling, general and administrative expenses increased
by $402,175.
7
Other Income
Other income of $29,227 in 1998 decreased $8,220 from $37,447 in 1997,
due to a decrease in interest income from reduced amounts invested.
Part II: Other Information
Item 4 Submission of Matters to a Vote of Security Holders.
(a) A Special Meeting was held on December 4, 1998.
(b) Not applicable.
(c) Shareholders voted upon a proposal to amend the Company's
Certificate of Incorporation to effect a one for four
reverse split and to decrease the number of shares of
Common Stock which the Company is authorized to issue from
150,000,000 to 37,500,000. 21,767,156 votes were cast for
the proposal, 104,200 votes were cast against or witheld.
6,500 shares abstained and 0 shares were represented by
"broker non-votes." Although the proposal received
sufficient votes to pass, the board of directors determined
not to amend the Certificate of Incorporation.
Item 6 Exhibits and reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Not applicable
8
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ADM Tronics Unlimited, Inc.
By:/s/ Dr. Alfonso DiMino
Dr. Alfonso DiMino
President
And By:/s/ Andre' DiMino
Andre' DiMino
Principal Financial Officer
Dated: Northvale, New Jersey
February 18, 1999
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