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 June 30, 2007
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.
(Name of Small Business Issuer in its Charter)
Delaware 22-1896032
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification Number)
224-S Pegasus Ave., Northvale, New Jersey 07647
(Address of Principal Executive Offices)
Issuer's Telephone Number, including area code: (201) 767-6040
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to the filing requirements for the past 90 days:
YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)
YES [ ] NO [X]
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:
53,882,037 shares of Common Stock, $.0005 par value, as of July 31, 2007
ADM TRONICS UNLIMITED, INC.
INDEX
Page Number
-----------
Part I. Financial Information
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheet - June 30, 2007 (unaudited) 3
Condensed Consolidated Statements of Operations - For the three
months ended June 30, 2007 and 2006 (unaudited) 4
Condensed Consolidated Statements of Cash Flows - For the three
months ended June 30, 2007 and 2006 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Controls and Procedures 12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits 13
2
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2007
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,335,871
Accounts receivable, net of allowance for
doubtful accounts of $900 46,637
Receivables - Ivivi 35,285
Inventories 257,664
Prepaid expenses and other current assets 13,950
------------------
Total current assets 2,689,407
Property and equipment, net of accumulated
depreciation of $6,722 47,922
Inventory - long term portion 153,614
Investment in Ivivi 2,281,124
Loan receivable and accrued interest, officer 93,302
Other assets 87,805
------------------
Total assets $ 5,353,174
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 162,615
Accrued expenses and other current liabilities 61,257
------------------
Total current liabilities 223,872
------------------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.0005 par value; 150,000,000 shares
authorized, 53,882,037 shares issued and outstanding 26,941
Additional paid-in capital 30,410,124
Accumulated deficit (25,307,763)
------------------
Total stockholders' equity 5,129,302
------------------
Total liabilities and stockholders' equity $ 5,353,174
==================
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
ADM TRONICS UNLIMITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006
(Unaudited)
2007 2006
------------------ ------------------
Revenues $ 293,086 $ 464,979
------------------ ------------------
Costs and expenses:
Cost of sales 170,059 122,955
Research and development 2,493 131,078
Selling, general and administrative 248,719 1,194,494
------------------ ------------------
Total operating expenses 421,271 1,448,527
------------------ ------------------
Operating loss (128,185) (983,548)
Interest and financing costs, net 25,143 (980,151)
Change in fair value of warrant and
registration rights liabilities - (224,003)
Equity in net loss of Ivivi (469,607) -
------------------ ------------------
Net loss $ (572,649) $ (2,187,702)
================== ==================
Net loss per share, basic and diluted: $ (0.01) $ (0.04)
================== ==================
Weighted average shares outstanding 53,882,037 53,882,037
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
4
ADM TRONICS UNLIMITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006
(Unaudited)
2007 2006
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (572,649) $ (2,187,702)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 3,223 4,846
Loss from equity investment 469,607 -
Stock based compensation - 230,672
Amortization of loan costs and discount - 211,462
Share based financing penalties - 640,717
Bad debts 100 7,338
Change in fair value of warrant and registration
rights liabilities - 224,003
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 42,861 60,626
Inventory (124,188) (3,479)
Prepaid expenses and other current assets 21,180 4,610
Other assets (369) (476)
Increase (decrease) in:
Accounts payable and accrued expenses 7,647 368,454
Deferred revenue - -
------------------ ------------------
Net cash used by operating activities (152,588) (438,929)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash retained by former consolidated subsidiary - -
Purchases of property and equipment (11,189) -
Receivable from Ivivi 1,372 -
------------------ ------------------
Net cash used by investing activities (9,817) -
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - 250,000
Deferred offering costs - (113,974)
------------------ ------------------
Net cash provided by financing activities - 136,026
------------------ ------------------
Net decrease in cash (162,405) (302,903)
Cash and cash equivalents, beginning of period 2,498,276 982,670
------------------ ------------------
Cash and cash equivalents, end of period $ 2,335,871 $ 679,767
================== ==================
Cash paid for:
Interest $ - $ 37,118
Income taxes - -
NONCASH FINANCING AND INVESTING ACTIVITIES:
During the three months ended June 30, 2007, Ivivi recorded an increase in additional
paid-in capital as a result of the recognition of compensation expense related to
option grants to employees and others. We have recorded a proportional increase in our
investment in Ivivi in the amount of $112,290, with a related credit to additional
paid-in capital. We have also recorded a change of ownership percentage adjustment
of $121.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
ADM TRONICS UNLIMITED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 AND 2006
(Unaudited)
NOTE 1 - ORGANIZATIONAL MATTERS
ADM Tronics Unlimited, Inc. ("we", "us", "the company" or "ADM"), was
incorporated under the laws of the state of Delaware on November 24, 1969. We
are authorized under our Certificate of Incorporation to issue 150,000,000
common shares, with $.0005 par value, and 5,000,000 preferred shares with $.01
par value.
The accompanying unaudited condensed consolidated financial statements as of
June 30, 2007 and for the three month periods ended June 30, 2007 and 2006 have
been prepared by ADM pursuant to the rules and regulations of the Securities and
Exchange Commission, including Form 10-QSB and Regulation S-B. The information
furnished herein reflects all adjustments (consisting of normal recurring
accruals and adjustments), which are, in the opinion of management, necessary to
fairly present the operating results for the respective periods. Certain
information and footnote disclosures normally present in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations. The Company believes that the disclosures provided are adequate to
make the information presented not misleading. These financial statements and
the information included under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" should be read in conjunction
with the audited financial statements and explanatory notes for the year ended
March 31, 2007 as disclosed in the Company's 10-KSB for that year as filed with
the SEC, as it may be amended.
The results of the three months ended June 30, 2007 are not necessarily
indicative of the results to be expected for the pending full year ending March
31, 2008.
NATURE OF BUSINESS
We are a manufacturer and engineering concern whose principal lines of business
are the production and sale of chemical products and the manufacture and sale of
medical devices. Our chemical product line is principally comprised of
water-based chemical products used in the food packaging and converting
industries. These products are sold to customers located in the United States,
Australia, and Europe. Medical equipment is manufactured in accordance with
customer specification on a contract basis. Our medical device product line
consists principally of proprietary devices used in the treatment of joint pain,
postoperative edema, and tinnitus. These devices are FDA cleared medical devices
known as "Electroceutical" units. These products are sold or rented to customers
located principally in the United States.
IVIVI OPERATIONS
Our former majority owned subsidiary, Ivivi Technologies, Inc. ("Ivivi"), filed
a Registration Statement with the Securities and Exchange Commission ("SEC") for
the initial public offering of a portion of its common stock. The Registration
Statement was declared effective by the SEC on October 18, 2006. As a result of
the consummation of Ivivi's initial public offering, we no longer own a majority
of the outstanding common stock of Ivivi. We do own approximately 34% of Ivivi's
outstanding common stock and can exert significant influence based upon the
percentage of Ivivi's stock owned by us. As a result, our investment in Ivivi
subsequent to October 18, 2006 is reported under the equity method of
accounting, whereby we recognize our share of Ivivi's earnings or losses as they
are incurred. For the three months ended June 30, 2006, Ivivi's revenues
included in these consolidated financial statements were $217,419 and Ivivi's
operating loss was $999,528.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of ADM Tronics
Unlimited, Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and, accordingly, require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates made by management include expected economic life and value of our
medical devices, deferred tax assets, option and warrant expenses related to
compensation to employees and directors, consultants and investment banks, the
value of warrants issued in conjunction with convertible debt, allowance for
doubtful accounts, and warranty reserves. Actual results could differ from those
estimates.
6
REVENUE RECOGNITION
CHEMICAL PRODUCTS:
Sales revenues are recognized when products are shipped to end users. Shipments
to distributors are recognized as sales where no right of return exists.
MEDICAL DEVICES:
We recognized revenue primarily from the rental and to a lesser extent from the
sale of our medical devices. Revenue from the rental and sales of medical
devices was primarily generated by our former subsidiary Ivivi. The Ivivi
operations have been consolidated in these financial statements through October
18, 2006.
After October 18, 2006, we recognize revenue from the sale of the medical
devices we manufacture for Ivivi upon completion of the manufacturing process.
Rental revenue, resulting from the Ivivi operations, has been recognized as
earned on either a monthly or pay-per-use basis in accordance with individual
customer agreements.
Sales are recognized when our products are shipped to end users including
medical facilities and distributors. Our products are principally shipped on a
"freight collect" basis. Shipping and handling charges and costs are immaterial.
We have no post shipment obligations, and sales returns have been immaterial.
We provide an allowance for doubtful accounts determined primarily through
specific identification and evaluation of significant past due accounts,
supplemented by an estimate applied to the remaining balance of past due
accounts.
NET LOSS PER SHARE
We use SFAS No. 128, "Earnings Per Share" for calculating the basic and diluted
loss per share. We compute basic loss per share by dividing net loss and net
loss attributable to common shareholders by the weighted average number of
common shares outstanding. Diluted loss per share is computed similar to basic
loss per share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
shares had been issued and if the additional shares were dilutive. Common
equivalent shares are excluded from the computation of net loss per share if
their effect is antidilutive.
Per share basic and diluted net loss amounted to $0.01 and $0.04 for the three
months ended June 30, 2007 and 2006, respectively. The assumed exercise of
common stock equivalents was not utilized for the three month periods ended June
30, 2007 and 2006 since the effect would be antidilutive. There were 11,626,854
common stock equivalents at June 30, 2007 and 50,182,341 at June 30, 2006.
NOTE 3 - INVENTORY
Inventory at June 30, 2007 consists of the following:
Current Long Term Total
------------- ------------- -------------
Raw materials $ 191,280 $ 118,084 $ 309,364
Finished goods 66,384 35,530 101,914
------------- ------------- -------------
$ 257,664 $ 153,614 $ 411,278
============= ============= =============
NOTE 4 - INVESTMENT IN IVIVI AND RELATED CAPITAL TRANSACTIONS
On October 18, 2006, Ivivi's Registration Statement on Form SB-2 related to its
initial public offering was declared effective by the Securities and Exchange
Commission (the "SEC"). Upon the consummation of Ivivi's initial public
offering, we no longer own a majority of the outstanding common stock of Ivivi
and do not control Ivivi's operations, but can exert significant influence based
upon the percentage of Ivivi's stock owned by us. As a result, we have
deconsolidated the operations of Ivivi subsequent to October 18, 2006. Any
future change of percentage of interest gains or losses related to our
investment in Ivivi will be recorded as a credit or charge to additional paid-in
capital.
During the period from April 1, 2007 to June 30, 2007, Ivivi recorded an
increase in additional paid-in capital as a result of the recognition of
compensation expense related to option grants to employees and others. We have
recorded a proportional increase in our investment in Ivivi in the amount of
$112,290, with a related credit to additional paid-in capital. We have also
recorded A change of ownership percentage adjustment of $121.
The market value of our investment in Ivivi at June 30, 2007 was $14,007,500.
However, our common shares of Ivivi have not been registered with the SEC and
are subject to restriction as a result of securities laws and a lock-up
agreement for 12 months from Ivivi's IPO that has been executed by us.
7
The following table sets forth summarized results of operations of Ivivi for the
three months ended June 30, 2007:
April 1, 2007
to
June 30, 2007
---------------
Revenue $ 460,999
Costs and expenses, net 1,873,607
---------------
Net loss $ (1,412,608)
===============
Assets at June 30, 2007 $ 8,141,533
Liabilities at June 30, 2007 1,403,894
---------------
Equity at June 30, 2007 $ 6,737,639
===============
NOTE 5 - CONCENTRATIONS
During the three month period ended June 30, 2007, Ivivi accounted for 21% of
our revenue, and one other customer accounted for 16% of our revenue. As of June
30, 2007, one customer represented 55% of our accounts receivable.
NOTE 6 - SEGMENT INFORMATION
Information about segments is as follows:
Chemical Medical Total
-------- ------- -----
Three months ended June 30, 2007
Revenues from external customers $ 198,214 $ 94,872 $ 293,086
Segment loss (operating loss) (139,251) 11,066 (128,185)
Three months ended June 30, 2006
Revenues from external customers 199,535 265,444 464,979
Segment loss (operating loss) (14,409) (969,139) (983,548)
Total assets at June 30, 2007 5,310,647 42,527 5,353,174
NOTE 7 - RELATED PARTY TRANSACTIONS
ADVANCES TO RELATED PARTIES
At June 30, 2007, ADM has advances to an officer aggregating $49,188. No
advances have been made since 2000. The advances bear interest at the rate of 3%
per year. Accrued interest at June 30, 2007 was $36,798.
At June 30, 2007, ADM has advances to an employee, the wife of the above
referenced officer, aggregating $7,316. No advances have been made since 2000.
This advance bears no interest.
IVIVI
Ivivi had $59,740 in management services provided to it by ADM pursuant to the
management services agreement during the three months ended June 30, 2007.
ADM has charged Ivivi $2,337 for the Company's manufacture of Ivivi's products
pursuant to the manufacturing agreement during the three months ended June 30,
2007and had total sales of $61,599 to Ivivi during that period.
As of June 30, 2007 Ivivi owed us $35,285 pursuant to the above transactions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our operations and financial condition should be
read in conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Quarterly Report on Form 10-QSB.
8
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of the "safe harbor" provisions under section 21E of the Securities
and Exchange Act of 1934 and the Private Securities Litigation Act of 1995. We
use forward-looking statements in our description of our plans and objectives
for future operations and assumptions underlying these plans and objectives.
Forward-looking terminology includes the words "may", "expects", "believes",
"anticipates", "intends", "forecasts", "projects", or similar terms, variations
of such terms or the negative of such terms. These forward- looking statements
are based on management's current expectations and are subject to factors and
uncertainties which could cause actual results to differ materially from those
described in such forward-looking statements. We expressly disclaim any
obligation or undertaking to release publicly any updates or revisions to any
forward- looking statements contained in this report to reflect any change in
our expectations or any changes in events, conditions or circumstances on which
any forward-looking statement is based. Factors which could cause such results
to differ materially from those described in the forward- looking statements
include those set forth under "Item. 1 Description of Business - Risk Factors"
and elsewhere in, or incorporated by reference into, the Company's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 2007 and other filings with
the Securities and Exchange Commission.
We maintain a website at www.admtronics.com. We make available free of charge on
our website all electronic filings with the Securities and Exchange Commission
(including proxy statements and reports on Forms 8-K, 10-KSB and 10-QSB and any
amendments to these reports) as soon as reasonably practicable after such
material is electronically filed with or furnished to the Securities and
Exchange Commission. The Securities and Exchange Commission maintains an
internet site (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the Securities and Exchange Commission.
Unless otherwise indicated in this prospectus, references to "we," "us," "our"
or the "Company" refer to ADM Tronics Unlimited, Inc. and its subsidiaries.
CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION:
Sales revenues from our chemical products are recognized when products are
shipped to end users. Shipments to distributors are recognized as sales where no
right of return exists.
We recognized medical device revenue primarily from the rental and, to a lesser
extent, from the sale of our medical devices. Revenue from the rental and sales
of medical devices was primarily generated by our former subsidiary Ivivi. The
Ivivi operations have been consolidated in these financial statements through
October 18, 2006.
After October 18, 2006, we recognize revenue from the sale of the medical
devices we manufacture for Ivivi upon completion of the manufacturing process.
Rental revenue from medical devices, resulting from the Ivivi operations, has
been recognized as earned on either a monthly or pay-per- use basis in
accordance with individual customer agreements.
Sales of medical devices are recognized when our products are shipped to end
users including medical facilities and distributors. Our products are
principally shipped on a "freight collect" basis. Shipping and handling charges
and costs are immaterial. We have no post shipment obligations and sales returns
have been immaterial.
USE OF ESTIMATES:
Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to reserves, deferred tax assets and valuation allowance, impairment of
long-lived assets, fair value of equity instruments issued to consultants for
services and fair value of equity instruments issued to others. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions; however, we believe
that our estimates, including those for the above- described items, are
reasonable.
9
BUSINESS OVERVIEW
ADM is a corporation that was organized under the laws of the State of Delaware
on November 24, 1969. During the years ended March 31, 2007 and 2006, our
operations were conducted through ADM itself and its subsidiaries, Ivivi
Technologies, Inc. (through October 18, 2006), Pegasus Laboratories, Inc. and
Sonotron Medical Systems, Inc. Ivivi has been deconsolidated as of October 18,
2006 upon the consummation of Ivivi's initial public offering, as we no longer
own a majority of the outstanding common stock of Ivivi and do not control
Ivivi's operations, but can exert significant influence based on the percentage
of Ivivi's stock owned by us. As a result, our investment in Ivivi subsequent to
October 18, 2006 is reported under the equity method of accounting and Ivivi's
results of operations and cash flows have not been consolidated with our results
of operations and cash flows since that date.
We are a technology-based developer and manufacturer of diversified lines of
products in the following three areas: (1) environmentally safe chemical
products for industrial use, (2) therapeutic non-invasive electronic medical
devices and (3) cosmetic and topical dermatological products. We have
historically derived most of our revenues from the development, manufacture and
sale of chemical products, and, to a lesser extent, from our therapeutic
non-invasive electronic medical devices and topical dermatological products.
However, during the three months ended June 30, 2006, we derived an increased
amount of our revenue from the sale and rental of our therapeutic non-invasive
medical devices, through Ivivi. With the consummation of Ivivi's IPO, our
continuing revenues will once again be derived primarily from the development,
manufacture and sale of chemical products, and, to a lesser extent, from our
therapeutic non- invasive electronic medical devices and topical dermatological
products. Our current medical segment includes our Sonotron subsidiary.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2007 AS COMPARED TO
JUNE 30, 2006
We believe the following table, which compares the results of operations for the
three months ended June 30, 2007 with the pro-forma results of operations for
the three months ended June 30, 2006 as if Ivivi's operations were reported on
one line, gives a more informative disclosure of our ongoing operations.
The pro forma financial information set forth below should be read in
conjunction with a reading of our historical financial statements. The pro forma
information is presented for illustrative purposes only and is not intended to
be indicative of our results of operations that may be reported in the future.
June 30, 2006
Pro Forma
Ivivi Operations
June 30, 2007 Reported on One Line
------------------ ------------------
Revenues $ 293,086 $ 247,560
------------------ ------------------
Costs and expenses:
Cost of sales 170,059 85,594
Research and development 2,493 262
Selling, general and administrative 248,719 145,724
------------------ ------------------
Total operating expenses 421,271 231,580
------------------ ------------------
Operating (loss) income (128,185) 15,980
Interest and financing costs, net 25,143 2,253
Equity in net loss of Ivivi (469,607) -
Loss from Ivivi operations - (2,205,935)
------------------ ------------------
Net loss $ (572,649) $ (2,187,702)
================== ==================
Net loss per share, basic and diluted: $ (0.01) $ (0.04)
================== ==================
Weighted average shares outstanding 53,882,037 53,882,037
REVENUES
We have included the operations of our Ivivi subsidiary in our consolidated
results of operations through October 18, 2006. For the three month period ended
June 30, 2006, revenues from such operations were $217,419.
Revenues were $293,086 for the three months ended June 30, 2007 as compared to
$247,560 for the three months ended June 30, 2006 (excluding Ivivi's
operations), an increase of $45,526, or 18%. The increase resulted from an
increase in sales of finished medical devices to Ivivi. Gross profit was
$123,027 and $161,966(excluding Ivivi's operations) for the three months ended
June 30, 2007 and 2006 respectively. Gross margins decreased as a result of
margins on $61,599 of sales of medical devices of approximately 17% to Ivivi as
compared to margins achieved from chemical products.
10
NET LOSS
We have included the operations of our Ivivi subsidiary in our consolidated
results of operations through October 18, 2006. For the three month period ended
June 30, 2006, net loss attributable to the Ivivi operations was $2,205,935.
Net loss for the three months ended June 30, 2007 was $572,649 compared to a net
loss for the three months ended June 30, 2006 of $2,187,702.
Selling, general and administrative expenses increased by $102,995, or
71%, from $145,724, excluding Ivivi's operations, to $248,719, mainly due to a
$65,613 increase in consulting and professional fees and a $21,870 increase in
compensation expense. We also recorded an equity method investment loss of
$469,607 in 2007 from our investment in Ivivi. Interest income increased
$22,890, to $25,143 in the three months ended June 30, 2007 from $2,253 in the
three months ended June 30, 2006, due to increased funds invested in a money
market account.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2007, we had cash and equivalents of $2,335,871 as compared to
$2,498,276 at March 31, 2007. The $162,405 decrease was primarily the result of
our loss from operations during the three month period. Our cash will be used
for increased administrative and marketing costs in order to attempt to increase
our revenue. The market value of our investment in Ivivi at June 30, 2007 was
$14,007,500. However, our common shares of Ivivi have not been registered with
the SEC and are subject to restriction as a result of securities laws and a
lock-up agreement for 12 months from Ivivi's IPO that has been executed by us.
OPERATING ACTIVITIES
Net cash used by operating activities was $152,588 for the three months ended
June 30, 2007 as compared to net cash used by operating activities of $438,929
for the three months ended June 30, 2006. The use of cash in 2007 was primarily
due to a net loss of $572,649 and an increase in net operating assets of
$60,516, partially offset by a non cash charge for the equity investment loss of
$469,607.
The use of cash in the 2006 period was primarily due to a net loss of $2,187,702
of which $2,205,935 was related to Ivivi's operations, partially offset by non
cash charges for the amortization of loan costs and amortization of discount of
$211,462 on the convertible notes issued in the private placements, stock based
compensation of $230,672, equity based penalty expense of $640,717 and the
increase in the fair value of the liability for warrants issued with
registration rights of $224,003. In addition, we recorded a decrease in accounts
receivable of $60,626 and an increase in accounts payable of $368,454.
INVESTING ACTIVITIES
For the three months ended June 30, 2007, cash used in investing activities was
$9,817. Of this amount, $11,189 was used for the purchase of office equipment
and $1,372 was received from Ivivi as repayment of advances.
FINANCING ACTIVITIES
During the three months ended June 30, 2006, we paid $113,974 for deferred costs
related to Ivivi's IPO and Ivivi had net proceeds from notes payable of
$250,000. We had no comparable items during 2007.
Subsequent to the receipt of funds from Ivivi in repayment of Ivivi's
indebtedness to the Company, management launched a sales and marketing
initiative which included, among other things, the re-branding of its
water-based industrial chemical products through the establishment of a new
division, Aqua-Based Technologies. In addition, the Company hired a Director of
Sales and Marketing for such division. This is part of a business plan to
enhance Company operations and to increase sales and marketing efforts for its
products. Such plan includes seeking to hire additional sales employees as well
as pursuing strategic relationships to help market and promote certain product
lines. Although we expect available funds and funds generated from our
operations to be sufficient to meet our anticipated needs for a minimum of 12
months, we may need to obtain additional capital to continue to operate and grow
our business. Our cash requirements may vary materially from those currently
anticipated due to changes in our operations, including our marketing and sales
activities, product development, and the timing of our receipt of revenues. We
do not have any material external sources of liquidity or unused sources of
funds. Our ability to obtain additional financing in the future will depend in
part upon the prevailing capital market conditions, as well as our business
performance. There can be no assurance that we will be successful in our efforts
to arrange additional financing on terms satisfactory to us or at all.
11
ITEM 3. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) that are designed to ensure that information required to
be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. Management necessarily applies its judgment in assessing the costs
and benefits of such controls and procedures, which, by their nature, can
provide only reasonable assurance regarding management's control objectives.
As of the end of the period covered by this Quarterly Report on Form 10- QSB, we
carried out an evaluation, with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our disclosure controls and procedures pursuant to Securities Exchange Act Rule
13a-15. Based on that evaluation as of June 30, 2007, the Company's principal
executive officer and principal financial officer concluded that the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) are effective, as of the date of
their evaluation, to ensure that the information required to be disclosed by the
Company in the reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING.
There were no changes in the Company's internal control over financial reporting
that occurred during the Company's last fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 6. EXHIBITS.
(a) Exhibit No.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADM TRONICS UNLIMITED, INC.
(Registrant)
By: /s/ Andre' DiMino
-----------------------------------
Andre' DiMino, Chief Executive
Officer and Chief Financial Officer
Dated: Northvale, New Jersey
August 14, 2007
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