PROSPECTUS
2,983,130 shares of Common Stock
ADM TRONICS UNLIMITED, INC.
ADM's common stock has been traded in the over-the-counter market
under the symbol ADMT. The reported last sale price of the common
stock on the Nasdaq Bulletin Board on February 17, 1999 was $.71875
per share.
The common stock is being offered for sale by three shareholders of
ADM and ADM will not receive any part of the proceeds from the sale.
An investment in the common stock involves substantial risks. See
"Risk Factors" beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is February 18, 1999
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors 3
Where you can find more information 11
Safe Harbor Statement under the Private
Securities Litigation
Reform Act of 1995 12
Recent Developments 13
Use of Proceeds 14
Selling Shareholders 14
Shares Eligible for Current and Future Sale 16
Plan Distribution 17
Description of Common Stock 17
Indemnification 18
Legal Matters 19
PROSPECTUS SUMMARY
ADM
ADM was incorporated in Delaware on November 24, 1969. ADM's
principal executive offices are located at 224-S Pegasus Avenue,
Northvale, New Jersey 07647 and its telephone number is (201) 767-6040.
The Offering
This prospectus relates to 2,983,130 shares of common stock which
are held by three shareholders of ADM. Sales of the common stock by the
selling shareholders may be subject to contractual obligations. See
"Selling Shareholders" and "Plan of Distribution."
RISK FACTORS
An investment in the common stock is speculative and involves
substantial risks. Prospective purchasers of the common stock should
carefully consider the following risk factors in addition to the other
information included or incorporated by reference in this prospectus
before purchasing the common stock.
Although ADM has engaged in business for more than 29 years, it has
been unprofitable during substantially all of such time
- - During the quarter ended June 30, 1998 ADM incurred losses of $86,750.
During the quarter ended September 30, 1998 ADM incurred losses of
$239,151. During the fiscal year ended March 31, 1998, ADM incurred
losses of $722,777.
- - ADM may never be able to operate profitably.
ADM's revenues have never exceeded approximately $2,000,000 in any
fiscal year
- - ADM's revenues were $555,822 during the quarter ended June 30, 1998
and $445,281 during the quarter ended September 30, 1998.
- - ADM's revenues may never increase.
On September 30, 1998, ADM had an accumulated deficit of $3,167,536
Because ADM has recently restated its financial condition and net
losses, claims may be asserted against ADM.
- - In order to correctly reflect consulting fees incurred by ADM and the
purchase price of assets purchased by ADM from Electropharmacology,
Inc., ADM has restated its net loss for the quarter ended June 30, 1998
as $86,750 and for the quarter ended September 30, 1998 as $152,401.
ADM previously reported a net loss for the June quarter of $60,255 and
for the September quarter of $94,943.
- - ADM previously reported that its book value of the assets purchased
from Electropharmacology in the quarter ended September 30, 1998 was
$1,350,000. ADM has restated the book value at $1,427,135.
- - ADM previously reported an accumulated deficit of $2,988,640 at June
30, 1998 and $3,083,583 at September 30, 1998. The accumulated deficit
has been restated as $3,015,135 for the June quarter and $3,167,536 for
the September quarter.
- - ADM previously reported stockholders' equity of $2,170,398 at June
30, 1998 and $3,425,455 at September 30, 1998. The amounts have been
restated as $2,238,403 for the June quarter and $3,556,752 for the
September quarter.
- - As a result of the restatement of its financial statements, claims may
be asserted against ADM by present or former shareholders of ADM.
Although ADM does not believe that any material liability to present or
former shareholders exists as a result of the restatement, and would
vigorously defend any claims made against it, a court could disagree
with ADM and award substantial damages to one or more plaintiffs or a
class of plaintiffs if a class action against ADM were to be brought.
Even in the absence of any liability, the cost of defending legal
actions could be material and could adversely affect ADM.
Because of the highly technological aspects of ADM's business,
ADM's activities are highly capital intensive
- - ADM may require additional capital to maintain its operations or
expand its business. ADM has not made any arrangements to obtain any
additional financing.
- - If additional capital becomes available to ADM, it may only be
available on terms unfavorable to ADM.
Because of the specialized nature of products that ADM has
marketed, ADM's actual and potential customer base is very small
- - ADM presently sells its chemical products to a limited number of
customers. During the fiscal year ended March 31, 1998 and the quarter
ended June 30, 1998 one of such customers accounted for an aggregate of
approximately 25% of the sales of those products. During the quarter
ended September 30, 1998, one of such customers accounted for an
aggregate of approximately 30% of the sales of those products.
- - The loss of any significant customer would have a material adverse
effect on ADM's business. See "Recent Developments."
ADM has lost its two largest customers for Sonotron Devices
- - Arthronix, Inc. was ADM's sole distributor of Sonotron Devices prior
to 1994 and has not purchased any Sonotron Devices from ADM since that
time.
- - During the fiscal years ended March 31, 1996 and 1997, sales of
Sonotron Devices contributed approximately 50% and 32% of revenues,
respectively, and were highly profitable. Sales of Sonotron Devices have
not been material subsequent to late 1996.
- - In June 1995, ADM appointed a Japanese company as its exclusive
distributor of Sonotron Devices in Japan, Singapore and Malaysia. The
Japanese distributor has advised ADM that it does not presently intend
to distribute any additional Sonotron Devices.
- - Substantially all revenues realized by ADM from sales of the Sonotron
Devices resulted from sales through Arthronix and the Japanese
distributor.
Patent protection may not be available or adequate to protect ADM's
products
- - Because virtually all of ADM's products may be copied or duplicated by
others, patent protection is of material importance to its business.
- - ADM may apply for additional patents and seek to obtain licenses to
patents and patent applications from others. Present or future
applications may not result in patents being issued or, if issued, the
claims allowed may not adequately protect ADM.
- - Patents which are currently being relied upon by ADM or which may be
issued to ADM in the future may be challenged, invalidated or
circumvented.
Another company has challenged ADM's patents relating to Sonotron
Devices
- - A United States patent in connection with a product which appears to
be similar to ADM's Sonotron Device was granted to Electrogesic
Corporation in 1994. Electrogesic's patent counsel rendered a written
opinion to the effect that its product does not infringe a patent held
by ADM, and, further that a patent held by ADM would be found invalid by
a court. Although, based upon the description of Electrogesic's product
in the opinion letter, ADM's patent counsel disagreed with that
conclusion and advised ADM that the Electrogesic's product infringes
three patents held by ADM, there can be no assurance that any patent
held by ADM will be determined by a court to be valid or to be infringed
by the third party's product. In 1994 ADM commenced an action in the
United States District Court for the Southern District of New York
against Electrogesic. ADM asserted claims based upon patent
infringement, interference with existing and prospective contractual and
business relations and breach of contract. Electrogesic denied any
wrongdoing and asserted counterclaims based upon unfair competition,
restraint of trade, violation of anti-trust laws and interference with
business relations. In June 1995, ADM withdrew its action and
Electrogesic withdrew the counterclaims. A similar action could be
instituted against ADM in the future which could result in an
unfavorable outcome to ADM.
ADM's products and proposed products could, in the future, be found
to infringe patents of others
- - Because medical products are covered by a large number of patents and
patent applications and patent applications in the United States remain
confidential until a patent is issued, infringement actions may be
instituted against ADM if ADM's products use or are suspected of using
technology, processes or other subject matter that is claimed under
other existing patents. The same result could occur if others obtain
patents claiming subject matter utilized by ADM.
- - An adverse outcome in any future patent dispute could subject ADM to
significant liabilities to third-parties, require disputed rights to be
licensed or require ADM to cease using the infringed technology.
- - If ADM's products infringe patents or proprietary rights of others,
ADM may be required to modify the design of its products or obtain a
license. ADM may not be able to adequately modify the design or obtain
a license on terms not unfavorable to ADM, if at all.
ADM's limited resources may render it unable to protect its patents
or challenge others
- - Because many holders of patents in the medical products industry have
substantially greater resources than does ADM and patent litigation is
very expensive, ADM may not have the resources necessary to challenge
successfully the validity of patents held by others or withstand claims
of infringement or challenges to its patents in cases where ADM's
position has merit.
- - Even if ADM prevails, the cost of litigation could have a material
adverse effect on ADM.
Trade secrets and other means of protection relied upon by ADM may
not adequately protect ADM
- - Because many of ADM's products and technologies are not patented, ADM
relies on trade secrets, copyright law, employee and third-party
nondisclosure agreements and other protective measures to protect some
of its intellectual property rights. These measures may not provide
meaningful protection to ADM.
- - The laws of many foreign countries do not protect ADM's intellectual
property rights to the same extent as do the laws of the United States,
if at all. Although ADM's sales in those countries have not been
material for more than two years, they may become material in the
future.
Because the formulas and specifications for ADM's chemical products
are not patented or otherwise protected, others may replicate ADM's
formulas
ADM is dependant on key executives who do not have employment
agreements with ADM
- - Because the success of ADM is largely dependent upon the personal
efforts, abilities and business relationships of its executive officers,
if any of the officers was to terminate his employment with ADM or be
unable to be employed before a qualified successor, if any, could be
found, ADM would be materially adversely affected.
ADM's Business is Intensely Competitive
Risks unique to ADM
- - Substantially all of ADM's competitors have substantially greater
financial resources than does ADM.
- - Limitations due to the number of vendors and others willing to deal
with an entity of ADM's size and the terms on which it can obtain raw
materials can place ADM at a competitive disadvantage.
- - Diapulse Corporation of America, Inc. manufactures and markets devices
that are substantially equivalent to the SofPulse Device.
- - A number of other manufacturers, both domestic and foreign, market
shortwave diathermy devices that produce deep tissue heat and that may
be used for the treatment of medical conditions for which the SofPulse
Device is also indicated.
- - ADM's products face competition from other forms of treatment such as
hyperbaric oxygen chambers, thermal therapies and hydrotherapy.
- - Companies with substantially larger expertise and resources than those
available to ADM may develop or market new products that directly
compete with ADM's present and proposed products.
ADM is subject to significant industry risks
- - Other technologies or products that are functionally similar to ADM 's
may currently be under development.
- - Alternate forms of treatment that compete with ADM's products may
achieve rapid acceptance in the medical community.
- - Because of the nature of ADM's products, ADM's business is intensely
competitive on the basis of both price and quality.
In addition to sales limitations based upon the specialized nature
of ADM's products, because of ADM's small amount of capital
resources, only a limited the number of potential customers can be
expected to purchase ADM's products
ADM's bargaining power with suppliers is limited by its lack of
significant capital
Because the technologies utilized by ADM products are rapidly
changing, competitors may develop technologies or products that
render ADM's products obsolete or less marketable.
- - If ADM is unable to continually enhance and improve its products and
to develop or acquire and market new products, ADM will be unable to
compete with others.
- - ADM may not be able to successfully enhance its existing products or
develop or acquire new products primarily because of its limited
resources.
Adverse experience with clinics
- - From time to time since 1989, ADM and others have operated clinics to
treat people suffering from the pain of osteoarthritis through the use
of the Sonotron Device. None of the clinics generated any significant
revenues. ADM believes that the inability to generate significant
revenues is a result of the unavailability of governmental reimbursement
or private insurance to patients.
- - No facility using Sonotron Devices may be able to operate profitably
in the absence of reimbursement or insurance, if at all.
Because ADM's products may cause personal injury or property
damage, ADM may be exposed to product liability claims by users of
the products
- - ADM maintains a general liability insurance policy that includes
aggregate product liability coverage of $2,000,000 which may not be
sufficient to cover potential claims.
- - The present level of insurance coverage may not be available in the
future at a reasonable cost, if at all.
Because ADM generally warrants its products to be free from defects
in materials and workmanship for periods of time ranging from
ninety days to two years, warranty claims and expenses could have a
material adverse effect on ADM
If changes in the health care system or method of reimbursement for
the SofPulse Device and any other medical device which may be
marketed by ADM in the United States occur, ADM may not be able to
market its medical devices
- - Significant uncertainty exists as to the reimbursement status of
existing and newly approved healthcare products and adequate third-party
coverage may not be available for any of ADM's products in the future.
Because ADM and its products are subject to significant
governmental regulation, any failure by ADM to comply with the
applicable regulations or a failure to obtain and maintain
necessary product approval could restrict or eliminate ADM's
ability to sell its products.
ADM's expansion plans could be seriously undermined by its limited
financial resources, potential inability to secure financing and
essential governmental approvals, and other factors
- - Because ADM is pursuing a growth strategy and intends to hire
additional personnel in the future, because of ADM's limited resources
it may not be able to effectively manage its expanding operations and
anticipate all of the changing demands that its planned expansion will
impose on its resources.
- - The success of ADM's planned expansion will depend on numerous
factors, many of which are beyond ADM's control, including, among
others, the securing of necessary governmental permits and regulatory
approvals, the hiring and training of management personnel, the terms
and availability of financing and other general economic and business
conditions.
- - Obtaining governmental approvals may be too costly for ADM.
- - The government may withhold or deny approval of a product if the
government believes that sufficient clinical data has not been submitted
or the efficacy or safety of the product does not warrant approval.
Because of their ownership of common stock, ADM's officers and
directors will, as a practical matter, have the ability to direct
substantially all matters requiring approval by the stockholders of
ADM, including the election of directors
- - Their ownership could discourage the possible takeover of ADM or make
the removal of management of ADM more difficult, discourage hostile bids
for control of ADM in which stockholders may receive premiums for their
common stock, or otherwise dilute the rights of holders of common stock
and the market price of common stock.
The market price for the common stock has been and may continue to
be highly volatile.
- - Factors such as ADM's financial results and introduction of new
products by ADM or its competitors, and various factors affecting the
healthcare industry generally, may have a significant impact on the
market price of the common stock.
- - In recent years, the stock market has experienced a high level of
price and volume volatility and market prices for the stock of small
companies which have not necessarily been related to the operating
performance of those companies.
Shares eligible for current and future sale could adversely affect
the prevailing market price of the common stock.
- - Approximately 64% of ADM's outstanding common stock can be sold
without restriction. See "Shares Eligible for Current and Future Sale."
Possible adverse effect of large number of options and warrants at
relatively low exercise prices
- - For the respective terms of ADM's options and warrants, their holders
may profit from a rise in the market price of the common stock with a
resulting dilution in the interests of the other stockholders.
- - The terms on which ADM may obtain additional financing during the
respective terms may be adversely affected by the their existence.
- - Holders of ADM's options and warrants may exercise them at a time when
ADM might be able to obtain additional capital through a new offering of
securities on terms more favorable than those provided by them.
- - On January 6, 1999, ADM had outstanding options and warrants for the
purchase of an aggregate of 5,867,819 shares of common stock at a
weighted average price of $.303 per share. Those shares represent
approximately 12% of ADM's outstanding common stock.
- - ADM has agreed to issue additional options and warrants for the
purchase of an aggregate of 6,000,000 shares of common stock at a
weighted average price of $.504 per share. Those shares represent
approximately 13% of ADM's outstanding common stock
- - Additional shares of common stock could become issuable pursuant to
anti-dilution adjustments under the terms of the options and warrants.
From time to time there has been insignificant trading volume in
the common stock and, accordingly, holders of the common stock may
not be able to sell their common stock when they desire to do so
The recent delisting from Nasdaq of the common stock may have an
adverse effect
Because the common stock was recently delisted from NASDAQ, the
marketability of the common stock and the prestige of ADM in the
financial community may be diminished. See "Recent Developments."
ADM has never paid any cash dividends on its common stock and has
no present intention to declare or to pay cash dividends on its
common stock
Issuance of preferred stock could adversely affect holders of the
common stock
- - The Board of Directors is empowered, without stockholder approval, to
issue preferred stock with dividend, liquidation, conversion, voting, or
other rights determined by the Board of Directors.
- - The issuance of preferred stock could adversely affect the voting
power, dividend and distribution rights of the holders of the common
stock.
- - The issuance of preferred stock could be utilized as a method of
discouraging, delaying, or preventing a change in control of ADM.
- - Although ADM has no present intention to issue any preferred stock,
it may do so in the future.
WHERE YOU CAN FIND MORE INFORMATION
ADM files annual, quarterly and current reports, proxy statements
and other information with the SEC. The public may read and copy any
document ADM files at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. the public may obtain information
on the operation of the public reference room by calling the SEC at 1-
800-SEC-0330. The SEC maintains an Internet site that contains reports,
proxy and information statements and other information regarding
issuers, such as ADM, that file electronically with the SEC. The
address of that site is http://www.sec.gov.
The SEC allows ADM to "incorporate by reference" the information
ADM files with it which means that ADM can disclose important
information to you by referring you to the documents containing the
information. The information incorporated by reference is considered to
be part of this prospectus, and later information that ADM files with
the SEC will automatically update and supersede this information. ADM
incorporates by reference the documents filed by us and listed below and
any future filings made with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 subsequent to the date of
this prospectus and prior to the termination of this offering.
- - Annual Report on Form 10-KSB, as amended, for the fiscal year ended
March 31, 1998;
- - Quarterly Reports on Form 10-QSB for the quarter ended June 30, 1998
and September 30, 1998;
- - Current Report on Form 8-K, as amended, dated May 27, 1998 ;
- - Current Report on Form 8-K, as amended, dated August 18, 1998;
- - The description of the common stock contained in our registration
statement on Form 10;. and
- - Proxy soliciting materials with respect to a Special Meeting of
Shareholders held on December 4, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us as follows:
Shareholder Services
ADM Tronics Unlimited, Inc.
224-S Pegasus Avenue
Northvale, New Jersey 07647
(201) 767-6040
This prospectus is part of a registration statement filed with the SEC,
File No. 333-65709.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
Statements contained in the "Prospectus Summary" and "Risk
Factors" regarding matters that are not statements of historical
fact, including statements relating to plans, strategies, expectations
and future economic results, are forward-looking statements within the
meaning of Section 27A of the Securities Act. Actual results may
differ materially from the statements made, as a result of various
factors, including risks associated with market acceptance of ADM's
products, ADM's capital needs, obtaining regulatory approval, patent
and other intellectual property protection, ADM's maintenance of its
net tangible assets, economic and other factors which impact the
market for ADM's products and other factors which are described from
time to time in ADM's filings with the SEC.
RECENT DEVELOPMENTS
- - In August 1998, ADM was notified that its Premarket Notification
filed with the FDA with respect to the Aurex-3 had been approved. The
approval does not constitute an assurance that the Aurex-3 can be
successfully marketed by ADM.
- - On August 18, 1998, ADM consummated the transactions contemplated by
the asset purchase agreement.
- - Reference is made to Item 3. "Legal Proceedings" in ADM's 1998
Annual Report on Form 10-KSB with respect to arbitration conducted
through the American Arbitration Association. In September 1998, the
arbitrator held that ADM breached the 1993 Distribution Agreement. The
Arbitrator awarded $186,000 plus interest to Arthronix as well as
attorneys' fees and costs of up to an aggregate of $53,000, all to be
paid by ADM.
- - In September 1998, ADM entered into an agreement with MEDIQ/PRN Life
Support Services, Inc. pursuant to which ADM appointed MEDIQ as its
exclusive distributor of SofPulse Devices. The distributorship will
run for three years unless terminated by either party at the end of
any twelve month period. MEDIQ has agreed to use its best efforts to
market SofPulse Devices to medical professionals and healthcare
entities with which it has existing relationships in order to secure
rental customers for the SofPulse Devices. MEDIQ has further agreed
to provide a 24 hour a day customer service center to support the
marketing efforts and maintain an adequate inventory of SofPulse
Devices. ADM will train MEDIQ's personnel in connection with renting,
marketing, use and maintenance of the SofPulse Devices. ADM has also
agreed to train customers in the clinical use of SofPulse Devices.
For its services under the Agreement, MEDIQ will receive 45% of
revenues received from the rental of the SofPulse Devices.
- - In October 1998, ADM entered into an Agreement with Byron Medical
pursuant to which Byron agreed to perform promotional activities in
connection with the SofPulse Devices. The Agreement will terminate in
October 2001 unless sooner terminated by either party at the end of
any twelve month period. ADM has agreed to pay Byron a commission of
7.5% of amounts received from customers referred by leads supplied by
Byron.
- - On December 16, 1998, the common stock was delisted from Nasdaq.
Because of the delisting, as long as the common stock remains below
$5.00 per share, trading in the common stock is subject to the
requirements of applicable rules under the Securities Exchange Act of
1934 which require additional disclosure by broker-dealers in
connection with any trades involving the common stock. Those rules
require the delivery, prior to any transaction in the common stock, of
a disclosure schedule explaining the penny stock market and associated
risks, and impose various sales practice requirements on
broker-dealers who sell the common stock to persons other than
established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must
make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to
sale. The additional burdens imposed upon broker-dealers may
discourage broker-dealers from effecting transactions in the common
stock, which could severely limit the liquidity of the common stock.
- - On December 8, 1998, Dr. Harold Gelb, D.M.D. was elected as a member
of ADM's Board of Directors. Dr. Gelb, age 73, has practiced
dentistry for more than 50 years and limits his practice to
temporomandibular disorders. Dr. Gelb is a Diplomate of the American
Board of Orofacial Pain and a Diplomate of the American Academy of
Head, Neck and Facial Pain. Dr. Gelb's address is 635 Madison Avenue,
New York, New York 10022. ADM has granted options to Dr. Gelb to
purchase an aggregate of 500,000 shares of common stock at a weighted
average price of $.372 per share.
USE OF PROCEEDS
ADM will not receive any proceeds from the sale of common stock by
the selling shareholders.
SELLING SHAREHOLDERS
The following table sets forth information as of the date of this
prospectus with respect to the common stock held by each selling
shareholder. Except as set forth below, none of the selling shareholders
has had any position, office or other material relationship with ADM or
any of its predecessors or affiliates within the past three years other
than as a result of the ownership of the common stock. The common stock
may be offered from time to time by the selling shareholders.
Name and Address Shares of Common Number of
Stock Shares Being
Beneficially Owned Offered
Electropharmacology, Inc. 1,400,000 (2) 1,400,000(2)
2301 NW 33rd Court
Pompano Beach, FL 33069
Jones, Day, Reavis & Pogue 1,437,130 (2) 1,437,130(2)
2300 Trammel Crow Center
Dallas, TX 75201
Resource Realty Services, Inc. 146,000 146,000
421-13 Route 59
Monsey, NY 10952
Totals 2,983,130 2,983,130
(1) For purposes of this prospectus, a person is deemed to be the
beneficial owner of securities that can be acquired by that
person within 60 days from the date of this prospectus upon the
exercise of warrants or options or the conversion of convertible
securities. Each beneficial owner's percentage ownership is
determined by assuming that any warrants, options or convertible
securities that are held by such person (but not those held by
any other person) and which are exercisable within the 60 day
period have been exercised or converted, as the case may be.
Accordingly, 1,500,000 and 75,000 shares of common stock
underlying Warrants issued by ADM to Electropharmacology and
Resource Realty, respectively, are not deemed to be beneficially
owned by them and, therefore, are not reflected in the table.
(2) Held of record by Andre' Di Mino, as Trustee, under a Voting
Trust Agreement. Pursuant to such Agreement, Mr. Di Mino has
full voting rights with respect to the shares until 2008 or until
such earlier time as they may be sold pursuant to either this
prospectus or Rule 144 under the Securities Act. Accordingly, Mr.
Di Mino may be deemed to be the beneficial owner of the shares.
On May 27, 1998, ADM entered into an asset purchase agreement
with Electropharmacology, Inc. pursuant to which ADM purchased assets
previously utilized by Electropharmacology in connection with the
SofPulse electromagnetic stimulation device marketed under the name
MRT-SofPulse or SofPulse for use in treating pain and edema in
post-operative soft tissue injuries. Reference is made to the
response to Item 1 of ADM's 1998 Annual Report on form 10-KSB.
Resource Realty Services, Inc. introduced ADM to Electropharmacology
and consulted with ADM in connection with the asset purchase
agreement. An affiliate of Electropharmacology is a consultant to
ADM.
Electropharmacology and Jones, Day, Reavis & Pogue agreed not to
sell any common stock prior to October 17, 1998 and September 17,
1998, respectively. They also agreed that for (a) the ninety day
period commencing September 18, 1998, in any calendar month,
collectively, they would not dispose of a number of shares of common
stock in excess of 5% of the average reported trading volume of the
common stock during the immediately preceding calendar month (such
limitation not being cumulative) and (b) during the period commencing
on December 17, 1998 and terminating on August 18, 1999, in any
calendar month, collectively, they will not sell a number of shares of
common stock in excess of 10% of the average reported trading volume
of the common stock during the immediately preceding calendar month
(such limitation not being cumulative). Electropharmacology has
agreed with Jones, Day that Electropharmacology will not sell any of
the common stock until the earlier of the time that Jones, Day has
sold all its common stock or the foregoing restrictions are no longer
in effect. Furthermore, until August 18, 1999, Electropharmacology
and Jones, Day have each agreed that prior to making any sale of any
common stock, it shall give notice to ADM and ADM shall have until the
next business day to notify the applicable selling shareholder that it
will purchase all of the common stock with respect to which notice was
given, at its fair market value as defined in the asset purchase
agreement.
ADM agreed that if the common stock has not been 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 February 3, 1999, ADM had purchased 87,870 shares from
Jones, Day for $60,000.
ADM and the selling shareholders have agreed to indemnify each
other with respect to losses, cost or damages, including, but not
limited to, those which may arise under the Securities Act.
SHARES ELIGIBLE FOR CURRENT AND FUTURE SALE
On January 6, 1999, ADM had 47,406,652 shares of common stock
outstanding. Of these shares, with the exception of contractual
restrictions imposed upon the selling shareholders, approximately
30,300,000 shares are freely transferable without restriction or
further registration under the Securities Act. The remaining shares of
common stock currently outstanding are "restricted securities" or
owned by affiliates within the meaning of such term in Rule 144
promulgated under the Securities Act, and which are currently eligible
for sale in the public market in reliance upon Rule 144.
- - In general, under Rule 144, a person (or persons whose shares are
aggregated), including persons who may be deemed to be "affiliates" of
ADM as that term is defined in Rule 144, is entitled to sell within
any three-month period a number of restricted shares owned for at
least one year that does not exceed the greater of (i) one percent of
the then outstanding shares of common stock, or (ii) the average
weekly trading volume in the common stock during the four calendar
weeks preceding the filing of a prescribed notice with the Commission
with respect to such sale.
- - Sales under Rule 144 are also subject to requirements as to the
manner of sale, notice and the availability of current public
information about ADM.
- - Where a minimum of two years has elapsed between the later of the
date of the acquisition of restricted securities from ADM or from an
affiliate of ADM and any resale in reliance on Rule 144 for the
account of either the initial acquiror or any subsequent holder, a
person who has not been an affiliate of ADM for at least the three
months immediately preceding the sale is entitled to sell such
securities under Rule 144 without regard to any of the limitations
described above.
- - Sales of substantial amounts of common stock in the public market
under Rule 144, pursuant to registration statements or otherwise could
adversely affect the prevailing market price of the common stock.
- - ADM has agreed to register an aggregate of 1,575,000 shares of
common stock underlying warrants held by the selling shareholders
under specified circumstances.
PLAN OF DISTRIBUTION
The common stock may be sold from time to time to purchasers
directly by the selling shareholders. Alternatively, the selling
shareholders may from time to time offer the common stock through
underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, concessions or commissions from the
selling shareholders for whom they may act as agent. The selling
shareholders and any underwriters, dealers or agents that participate
in the distribution of common stock may be deemed to by underwriters,
and any commissions or concessions received by any such underwriters,
dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
The common stock may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, or at
varying prices determined at the time of sale or at negotiated prices.
Under agreements entered into with ADM, the selling shareholders, and
any underwriter they may utilize, will be indemnified by ADM against
specified civil liabilities, including liabilities under the
Securities Act.
ADM has estimated its expenses of the offering of the common
stock by the selling shareholders as follows:
Registration Fee $ 510
Professional Fees and Expenses $ 18,000
Miscellaneous $ 1,490
Total $ 20,000
Electropharmacology has agreed to pay $15,000 of such expenses. The
remainder of the expenses has been or will be paid by ADM.
DESCRIPTION OF COMMON STOCK
Set forth below is a description of the material terms and
provisions of the common stock which should be read in conjunction
with the Certificate of Incorporation, as amended, of ADM and the
By-Laws, as amended, of ADM.
Holders of the common stock are entitled to one vote at all
meetings of stockholders for each share held by them with respect to
all matters upon which they have a right to vote. Holders of common
stock have no preemptive rights and have no other rights to subscribe
for additional common stock of ADM, nor do the holders have any
conversion rights or rights of redemption. All common stock will
participate equally in dividends, when, as and if declared by the
Board of Directors, out of funds legally available therefor, and in
net assets upon liquidation, subject to the rights of holders of
preferred stock, if any.
Transfer Agent. ADM's transfer agent is Securities Transfer
Corporation, 16910 Dallas Parkway, Suite 100, Dallas, TX 75248.
INDEMNIFICATION
ADM's By-Laws provide that ADM shall, to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law,
indemnify its executive officers and directors.
Section 145 of the Delaware General Corporation Law empowers a
Delaware corporation to indemnify any person who is, or is threatened
to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was an
officer or director of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent
of any other corporation or enterprise. The indemnity may include
expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that he
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. A Delaware corporation, may
indemnify officers and directors in an action by or in the right of
the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him
against the expenses which he actually and reasonably incurred in
connection therewith. The indemnification provided is not deemed to
be exclusive of any other rights to which an officer or director may
be entitled under a corporation's by-laws, by agreement, vote, or
otherwise.
Insofar as indemnification arising under the Securities Act may be
permitted to directors, officers and controlling persons of ADM
pursuant to the foregoing provisions, or otherwise, ADM has been
advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
ADM and the selling shareholders have agreed to indemnify each
other in specified circumstances. See "Selling Shareholders."
LEGAL MATTERS
Legal matters relating to the common stock has been passed upon for
ADM by Reisman & Associates, P.A., Boca Raton, Florida to the extent
set forth in that firm's opinion filed as an exhibit to the
registration statement.
No person has been authorized
in connection with the offering
made to give any information or
to make any representations not
contained in this prospectus and,
if given or made, such information PROSPECTUS
or representations must not be ADM TRONICS UNLIMITED, INC.
relied upon as having been 2,983,130 SHARES OF
authorized by ADM. This prospectus COMMON STOCK
does not constitute an offer to sell
or a solicitation of an offer to
buy any of the securities offered
hereby to any person or by anyone
in any jurisdiction in which it is
unlawful to make such offer or
solicitation. Neither the delivery
of this prospectus nor any sale
made hereunder shall, under any
circumstances, create any
implication that the information
herein is correct as of any date
subsequent to the date hereof.
