t68409_10k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
fiscal year ended March 31, 2010
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
transition period from __________ to __________
COMMISSION
FILE NUMBER 0-17629
ADM
TRONICS UNLIMITED, INC.
(Name of
registrant as specified in its charter)
|
Delaware
|
22-1896032
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
incorporation
or organization)
|
|
224
Pegasus Avenue, Northvale, New Jersey 07647
(Address
of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number (201) 767-6040
SECURITIES
REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES
REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON
STOCK, $.0005 PAR VALUE
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x
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
such filing requirements for the past 90 days. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
|
Large accelerated
filer o
|
|
Accelerated filer
o
|
|
Non-accelerated
filer o
(Do
not check if a smaller reporting company)
|
|
Smaller reporting
company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes o No x
The
aggregate market value of voting stock held by non-affiliates of the registrant
as of September 30, 2009, the last business day of the registrant’s most
recently completed second fiscal quarter was $681,415.
The
number of shares of the Common Stock outstanding as of June 29, 2010 was
53,939,537.
DOCUMENTS
INCORPORATED BY REFERENCE
Not
applicable.
FORWARD
LOOKING STATEMENTS
This
Annual Report on Form 10-K contains various forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and information that is based on management’s beliefs as well
as assumptions made by and information currently available to management.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such expectations will
prove to be correct. When used in this report, the words “anticipate,”
“believe,” “estimate,” “expect,” “predict,” “project” and similar expressions
are intended to identify forward-looking statements. We cannot guarantee the
accuracy of the forward-looking statements, and you should be aware that our
actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including the statements
under “Risk Factors” set forth in “Item 1 - Description of Business” and the
statements under “Critical Accounting Policies” set forth in “Item 6 -
Management’s Discussion and Analysis or Plan of Operation.” Due to these
uncertainties and risks, readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this Annual
Report on Form 10-K.
Unless
otherwise indicated in this prospectus, references to “we,” “us,” “our” or the
“Company” refer to ADM Tronics Unlimited, Inc. and its
subsidiaries.
PART
I
ITEM 1.
BUSINESS
COMPANY
OVERVIEW
The
Company is a technology-based developer and manufacturer of diversified lines of
products and derives revenue from the production and sale of environmentally
safe chemical products for industrial, medical and cosmetic uses and electronics
for non-invasive medical and other applications.
The
Company is a corporation that was organized under the laws of the State of
Delaware on November 24, 1969. Our operations are conducted through ADM Tronics
Unlimited, Inc. (“ADM”) and its subsidiaries, Pegasus Laboratories, Inc.
(“Pegasus”), Sonotron Medical Systems, Inc. (“SMI”)and Action Industries
Unlimited LLC. (“Action”). As of June 29, 2010, ADM owned approximately 100%,
94% and 100% of the outstanding capital stock of Pegasus, SMI and Action,
respectively. In addition, the Company owns a minority interest in Montvale
Technologies Inc, (formerly known as Ivivi Technologies Inc.) (“ITI”), which
until October 18, 2006 was operated as a subsidiary of the Company. ITI was
deconsolidated as of October 18, 2006 upon the consummation of ITI’s initial
public offering, as we no longer owned a majority of the outstanding common
stock of ITI and do not control ITI’s operations, but can exert significant
influence based on the percentage of ITI’s stock owned by us. As a result, our
investment in ITI from October 18, 2006 through March 31, 2008 was reported
under the equity method of accounting. Since April 1, 2008, we report our
investment in ITI at fair value. As of June 29, 2010, we owned approximately
28.9% of the outstanding capital stock of ITI. On February 12, 2010
substantially all of the assets of ITI were sold to Ivivi Health Sciences, LLC
(“IHS”) an unaffiliated entity controlled by ITI’s former Chairman of the
Board. Concurrent with such asset sale, the Company entered into
agreements with IHS for services related to engineering and regulatory matters,
and the previous manufacturing agreement with ITI was assigned to IHS, as
further discussed in footnote 15 to the financial statements.
COMPANY
PRODUCTS
ENVIRONMENTALLY
SAFE CHEMICAL PRODUCTS FOR INDUSTRIAL, COSMETIC AND TOPICAL USES
INDUSTRIAL
We
develop, manufacture and sell chemical products to industrial users. Such
products consist primarily of the following:
|
●
|
Water-based
primers and adhesives;
|
|
●
|
Water-based
coatings and resins;
|
|
●
|
Water-based
chemical additives; and
|
|
●
|
Anti-static
conductive paints, coating and other
products.
|
Water-based
primers and adhesives are chemical compounds used to bind different plastic
films, metal foils and papers. Examples are the binding of polyethylene to
polyester, nylon, vinyl, aluminum, paper and cellophane. Our water-based primers
and adhesives are similar in function to solvent-based primers that are widely
used to bind plastic films, papers and foils. Solvent-based systems have come
under criticism since they have been found to be highly pollutant, dangerous to
health and generally caustic in nature. Based upon our experience since 1969,
including information furnished to us by certain of our customers, we believe
that water-based systems have no known polluting effects and pose no known
health hazards. There can, of course, be no assurance that any governmental
restrictions will not be imposed on our water-based products or that such
products will be accepted as replacements for solvent based
products.
Coatings
and resins for the printing industry are used to impart properties to the
printed substrate. Our coatings and resins can be used to coat printed material
for glossy or aesthetic appeal to make such material virtually impervious to
certain types of grease and to impart other characteristics required or desired
for various products and specifications.
Certain
of our chemical additives are used to impart properties to inks and other
chemical products used in the food packaging and printing
industries. These additives are used for their ability to improve the
performance of such products.
On July
17, 2009, we purchased substantially all of the assets of Anti-static Industries
of Delaware, Inc., which is now a division of ADM Tronics Unlimited,
Inc. Anti-static Industries of Delaware, Inc. was a company involved
in the research, development and manufacture of water-based and proprietary
electrically conductive paints, coatings and other products and accessories.
Joseph Kaye, founder and former President of Anti-static Industries of Delaware,
Inc., consults with us and continues research and development of conductive and
antistatic technologies and products. We now develop and manufacture a full-line
of anti-static products for commercial and industrial use through a division of
our company that we refer to as “Anti-static Industries”. Antistatic Industries
develops and distributes proprietary conductive paints, coatings and other
products and accessories which can be used by computer, pharmaceutical and
chemical companies to prevent, reduce or eliminate static electricity. Many
industries are concerned with static electricity as it can be hazardous to
personnel and damage corporate facilities, high-end computers, electronic
equipment and valuable parts. Antistatic Industries has a wide range of products
including paints, hoses, garments, floor mats, rugs, strapping, tapes,
hook-and-loop, adhesive products and many other specialized items;
all with conductive properties. Antistatic Industries has also
pioneered low volatile organic compound conductive and antistatic paint and
coating formulations that can be used as replacements for paints and coatings
made from hazardous solvents. Antistatic Industries seeks to continually develop
new products through its research and development department for new and current
customers to aid in their quest for maximum protection with less waste and
rejects in their manufacturing processes.
None of
our chemical products are protected by patents, although the names of some of
such products have been protected by trademarks. We do not believe that any such
trademarks are material to our business. As of March 31, 2010, the dollar amount
of backlog orders for our chemical products believed by us to be firm, was not
material.
COSMETIC
AND TOPICAL PRODUCTS
The
Company, through its subsidiary, Pegasus, has developed several cosmetic and
topical products. We have not realized any significant revenues from such
products and there can be no assurance that any such products will account for
significant revenues or any profits in the future.
Although
we believe that our proposed products can be successfully marketed for
over-the-counter use through one or more entities representing numerous retail
pharmacies and otherwise, there can be no assurance that sales of such products
will be material or that we will be able to derive any profits there
from.
NON-INVASIVE
ELECTRONIC MEDICAL AND OTHER DEVICES
CONTRACT
MANUFACTURING
The
Company derives revenues from contract manufacturing of electronic medical and
other devices for its affiliate ITI, IHS and other customers. During
the year ended March 31, 2010, revenues from ITI and IHS contract manufacturing
were approximately $62,307 and $11,784, respectively, or collectively, 6% of
total revenues, down from approximately $564,008 from ITI, or 38% of total
revenues during the year ended March 31, 2009.
SONOTRON
TECHNOLOGY
SMI, a
majority-owned subsidiary of ADM, has developed a technology, known as the
Sonotron Technology, to treat subjects suffering from the pain of inflammatory
joint conditions. Although some of the devices utilizing this technology are
commercially available for the treatment of animals, none of such devices have
received clearance from the U.S. Food and Drug Administration (the “FDA”) for
human application in the United States. Pursuant to a manufacturing agreement,
the Company is the exclusive manufacturer of the Sonotron devices.
The
Sonotron Technology is the subject of three United States patents (the “Sonotron
Patents”), which expire in 2011, 2012 and 2016.
As of
March 31, 2010, the dollar amount of backlog orders for Sonotron Devices was not
material.
ACTION
On August
27, 2008, we acquired substantially all of the assets of Action Spas, a
manufacturer of electronic controllers for spas and hot tubs, under our
wholly-owned subsidiary Action. We acquired Action to continue to
expand our electronics segment operations, and for the opportunity to expand our
operations into the OEM market. During the fiscal years ended March 31, 2010 and
2009, Action Spas had revenues of $25,103 and $41,531,
respectively.
WELLINGTON
During
the three months ended June 30, 2009, we invested in Wellington Scientific, LLC
(“Wellington”) which has rights to an electronic uroflowmetry diagnostic medical
device technology. These products are currently distributed in South
Africa, but are not compliant with US FDA requirements for distribution in the
US. We have commenced making modifications to the design of these products for
compliance with FDA standards and create the required documentation for
distribution of these products in the US. We invested a total of $50,000,
with $10,000 provided in cash, and $40,000 in services provided to Wellington.
On June 4, 2009, Wellington issued a secured convertible note to us for a
principal amount of $50,000 with an interest rate of 10%. In addition, we
shall be the exclusive manufacturer of these products for Wellington, pursuant
to an agreement, and shall receive a percentage of future sales, if any. To date
there have been no sales of these electronic uroflowmetry diagnostic medical
devices.
CUSTOMERS
During
our fiscal years ended March 31, 2010 and 2009, sales of chemical products
accounted for approximately 76% and 52% of our operating revenues, respectively;
sales and manufacturing charges for electronic products accounted for
approximately 24%, and 48% of our operating revenues, respectively; and sales of
our cosmetic and topical dermatological products were de
minimis.
During
the year ended March 31, 2010, three customers accounted for 50% of ADM’s
revenue. During the fiscal year ended March 31, 2009, two customers accounted
for 54% of ADM’s revenue. As of March 31, 2010, two customers represented 65% of
our accounts receivable. As of March 31, 2009, two customers represented 67% of
our accounts receivable. The loss of these major customers could have a material
impact on our operations and cash flow.
MARKETING
AND DISTRIBUTION
A
majority of ADM’s chemical product sales are distributed to customers directly
from ADM’s headquarters. Customers place purchase orders with the Company and
chemical products are then shipped via common carrier truck delivery on an “FOB
shipping point” basis. A portion of the sales are accomplished through
distributors who place purchase orders with ADM for certain quantities of its
chemical products which are shipped by common carrier to their respective
warehouses. These stocking distributors then ship product to the ultimate
customer via common carrier from their inventory of ADM’s chemical
products.
MANUFACTURER
AND SUPPLIERS
MANUFACTURER
ADM
manufactures its chemical products and SMI’s, Action’s and IHS’s electronic
products at its facilities located in Northvale, New Jersey.
ADM, SMI
and ITI (through February 12, 2010 and IHS subsequently, which was assigned the
manufacturing agreement from ITI) are parties to manufacturing
agreements, pursuant to which ADM serves as the exclusive manufacturer of all
current and future medical, non-medical electronic and other devices or products
to be produced by such entities. Pursuant to the terms of the manufacturing
agreement, for each product that ADM manufactures for the entity, the entity
pays ADM an amount equal to 120% of the sum of (i) the actual, invoiced cost for
raw materials, parts, components or other physical items that are used in the
manufacture of the product and actually purchased for the entity by the Company,
if any, plus (ii) a labor charge based on ADM’s standard hourly manufacturing
labor rate.
ADM
warranties the products it manufactures for SMI and IHS against defects in
material and workmanship for a period of 90 days after the completion of
manufacture. After such 90-day period, ADM has agreed to provide repair services
for the products to the entity at its customary hourly repair rate plus the cost
of any parts, components or items necessary to repair the products unless the
entity provides such parts, components or items to ADM.
Under the
manufacturing agreement, all inventions, patentable or otherwise, trade secrets,
discoveries, ideas, writings, technology, know-how, improvements or other
advances or findings relating to the entities’ products and technologies shall
be and become the exclusive proprietary and confidential information of such
entity or any person to whom such entity may have assigned rights therein. The
Company has no rights in any such proprietary or confidential information and is
prohibited from using or disclosing any of such proprietary or confidential
information for its own benefit or purposes, or for the benefit or purpose of
any other person other than the entity without such entity’s prior written
consent.
ADM has
also agreed to cooperate with each entity in securing for it any patents,
copyrights, trademarks or the like which it may seek to obtain in connection
therewith. If ADM breaches any of the confidentiality agreements contained in
the manufacturing agreement, or if these agreements are not sufficient to
protect the entity’s technology or are found to be unenforceable, the entity’s
competitors could acquire and use information that it considers to be our trade
secrets and the entity may not be able to compete effectively. Since ADM is the
exclusive manufacturer of all of SMI’s and IHS’s current and future products
under the manufacturing agreement, if the operations of ADM are interrupted or
if orders or orders of other customers of the Company exceed our manufacturing
capabilities, we may not be able to deliver products on time and the entities
may not be able to deliver their respective products to their respective
customers on time. Under the terms of the manufacturing agreement, if ADM is
unable to perform its obligations thereunder or is otherwise in breach of any
provision thereof, the entities have the right, without penalty, to engage third
parties to manufacture some or all of their products. In addition, if an entity
elects to utilize a third-party manufacturer to supplement the manufacturing
being completed by ADM, such entity has the right to require us to accept
delivery of the products from these third-party manufacturers, finalize the
manufacture of the products to the extent necessary for such entity to comply
with FDA regulations and ensure that the design, testing, control, documentation
and other quality assurance procedures during all aspects of the manufacturing
process have been met.
As the
exclusive manufacturer of the medical devices of SMI and IHS, ADM
is required to comply with quality requirements, which require
manufacturers,
including
third-party manufacturers, to follow stringent design, testing, control,
documentation and other quality assurance procedures during all aspects of the
manufacturing process. In addition, our manufacturing facility is required to be
registered as a medical device manufacturing facility with the FDA and is
subject to inspection by the FDA. The Company has been registered by the FDA as
a Registered Medical Device Establishment since 1988 allowing it to manufacture
medical devices in accordance with procedures outlined in FDA regulations, which
include quality control and related activities. Such registration is
renewable annually and although we do not believe that the registration
will fail to be renewed by the FDA, there can be no assurance of such
renewal. Our failure to obtain any annual renewal would have a
material adverse effect on the entities if they were not able to secure
another manufacturer of their products.
SUPPLIERS
ADM
purchases the raw materials used in the manufacture of its chemical products
from numerous sources. We believe that all necessary raw materials for our
chemical products are readily available and will continue to be so in the
foreseeable future. We have never had, nor do we anticipate experiencing, any
shortages of such materials. The raw materials for chemical products consist
primarily of water, resins, elastomers and catalysts. We generally maintain
sufficient quantities of inventories of our chemical products to meet customer
demands. When orders are received by us for our chemical products, our customers
require immediate shipment thereof. Accordingly, in order to satisfy its
customers’ needs, we have maintained an inventory ranging, in dollar amounts,
from 15% to 30% of sales of chemical products in the form of either raw
materials or finished goods.
We
purchase the raw materials, parts, components and other items that are required
to manufacture products for SMI, Action and IHS. We rely on a limited number of
suppliers for such raw materials, parts, components and other items. Although
there are many suppliers for each of these raw materials, parts, components and
other items, we are dependent on a limited number of suppliers for many of the
significant raw materials and components due to our customers’ requirements. We
do not have any long-term or exclusive purchase commitments with any of
our suppliers. The failure to maintain existing relationships with
suppliers or to establish new relationships in the future could also negatively
affect our ability to obtain raw materials and components used in the products
in a timely manner. If we are unable to obtain ample supply of product from our
existing suppliers or alternative sources of supply, we may be unable to satisfy
SMI’s, Actions and IHS’s orders which could reduce our revenues and adversely
affect their relationships with their customers.
RESEARCH
AND DEVELOPMENT
During
our fiscal years ended March 31, 2010 and 2009, research and development
expenses with respect to company-sponsored research and development activities
relating to our chemical business were approximately $27,995 and $0,
respectively. During such fiscal years, we did not expend any funds on
customer-sponsored research and development activities with respect
thereto.
During
our fiscal years ended March 31, 2010 and 2009, other than the regular
compensation paid by us to our executive officers, we did not spend any
appreciable amounts on testing, application, clinical studies and
company-sponsored research and development activities in connection with the
Sonotron Technology and other activities determined in accordance with generally
accepted accounting principles. During each of such years no material amounts
were spent on customer-sponsored research and development activities relating to
the development of new products, services or techniques or the improvement of
any of the foregoing.
During
our fiscal years ended March 31, 2010 and 2009, we made no material expenditures
with respect to company-sponsored research and development activities relating
to our medical device business, with the exception of minimal unreimbursed
R&D expense in the amount of $232 for our uroflowmetry device related to our
agreement with Wellington Scientific.
COMPETITION
Our
chemical business is highly competitive and substantially all of our competitors
possess greater experience, financial resources, operating history and marketing
capabilities than do we. Although we do not believe that there are one or more
dominant competitors in such industry, there can be no assurance that we will be
able to effectively compete with any or all of our competitors on the basis of
price, service or otherwise. Competitors may be better able to withstand a
change in conditions within the chemical products industry and throughout the
economy as a whole. In addition, current and anticipated future consolidation
among our competitors and customers may cause us to lose market share as well as
put downward pressure on pricing. Furthermore, there is a trend in the chemical
industry toward relocation of manufacturing facilities to lower-cost regions
such as Asia. Such relocation may permit some of our competitors to lower their
costs and improve their competitive position. If we do not compete successfully,
our business, operating margins, financial condition, cash flows and
profitability could be adversely affected.
Our
results of operations depend, in part, on our ability to expand our chemical
product offerings. We are committed to remaining a competitive producer and
believe that our portfolio of new or re-engineered products is strong. However,
we may not be able to develop new products, re-engineer existing products
successfully or bring them to market in a timely manner. While we believe that
the products, pricing and services we offer customers are competitive, we may
not be able to continue to attract and retain customers to which to we sell our
chemical products.
INSURANCE
The
Company may be exposed to potential product liability claims by those who use
our products. Therefore, we maintain a general liability insurance policy, which
includes aggregate product liability coverage of $7,000,000 for certain of our
products. We believe that our present insurance coverage is adequate for the
types of products currently marketed. There can be no assurance, however, that
such insurance will be sufficient to cover potential claims or that the present
level of coverage will be available in the future at a reasonable
cost.
EMPLOYEES
As
of June 29, 2010, we had 15 full-time employees. As of such date, we had
one salaried employee in an executive or managerial position.
ITEM
1A. RISK FACTORS
An
investment in our stock involves a high degree of risk. You should carefully
consider the following information, together with other information in this
annual report, before buying shares of our stock. If any of the following risks
or uncertainties occur, our business, financial condition and results of
operations could be materially and adversely affected, the trading price of our
stock could decline and you may lose all or a part of the money you paid to buy
our stock.
RISKS
RELATING TO OUR CHEMICAL BUSINESS
NEW
ENVIRONMENTAL OR OTHER REGULATIONS COULD INCREASE THE COMPANY’S OPERATING
COSTS.
Like
other manufacturers, the Company is subject to a broad range of Federal, state
and local laws and requirements, including those governing discharges in the air
and water, the handling and disposal of solid and hazardous substances and
wastes, the remediation of contamination associated with the release of
hazardous substances, work place safety and equal employment opportunities. We
have made expenditures to comply with such laws and requirements. We believe,
based on information currently available to management, that we are in
compliance with applicable environmental and other legal requirements and that
we will not require material capital expenditures to maintain compliance with
such requirements in the foreseeable future. Governmental authorities have the
power to enforce compliance with such laws and regulations, and violators may be
subject to penalties, injunctions or both. Third parties may also have the right
to enforce compliance with such laws and regulations. As ADM develops new
formulations for its chemical products, those products may become subject to
additional review and approval requirements governing the sale and use of its
products. Although our manufacturing processes do not currently result in the
generation of hazardous wastes, this may not always be the case and material
costs or liabilities may be incurred by us in the future as a result of the
manufacturing operations. It is also possible that other developments, such as
additional or increasingly strict requirements of laws and regulations of these
types, or enforcement policies there under, could significantly increase our
costs of operations.
BECAUSE
WE USE VARIOUS MATERIALS AND SUBSTANCES IN MANUFACTURING OUR CHEMICAL PRODUCTS,
OUR PRODUCTION FACILITIES ARE SUBJECT TO OPERATING HAZARDS THAT COULD CAUSE
PERSONAL INJURY AND LOSS OF LIFE, SEVERE DAMAGE TO, OR DESTRUCTION OF, PROPERTY
AND EQUIPMENT AND ENVIRONMENTAL CONTAMINATION.
We are
dependent on the continued operation of our production and distribution
facility. This facility is subject to hazards associated with the manufacture,
handling, storage and transportation of chemical materials and products,
including natural disasters, mechanical failure, unscheduled downtime, labor
difficulties, transportation interruptions, and environmental hazards, such as
spills, discharges or releases of toxic or hazardous substances and remediation
complications. These hazards can cause personal injury and loss of life, severe
damage to, or destruction of, property and equipment and environmental
contamination and other environmental damage and could have a material adverse
effect on our financial condition. In addition, due to the nature of our
business operations, we could become subject to scrutiny from environmental
action groups.
WE RELY
SIGNIFICANTLY ON RAW MATERIALS IN THE PRODUCTION OF OUR CHEMICAL PRODUCTS AND
FLUCTUATIONS IN COSTS OF SUCH RAW MATERIALS WOULD INCREASE OUR OPERATING
EXPENSES.
Our
manufacturing operations with respect to our chemical products depend upon
obtaining adequate supplies of our raw materials on a timely basis. The loss of
a key source of supply or a delay in shipments could have an adverse effect on
our business. We are exposed to price risks associated with these raw material
purchases. The availability and prices of raw materials may be subject to
curtailment or change due to, among other things, new laws or regulations,
suppliers’ allocations to other purchasers, interruptions in production by
suppliers, changes in exchange rates, cost components of raw materials and
worldwide price levels. Our results of operations could be adversely affected if
we are unable to obtain adequate supplies of raw materials in a timely manner or
if the costs of raw materials increased significantly.
WE FACE
COMPETITION FROM OTHER CHEMICAL COMPANIES, WHICH COULD ADVERSELY AFFECT OUR
REVENUE AND FINANCIAL CONDITION.
We
actively compete with companies producing the same or similar products and, in
some instances, with companies producing different products designed for the
same uses. We encounter competition in price, delivery, service, performance,
product innovation and product recognition and quality, depending on the product
involved. For some of our products, our competitors are larger and have greater
financial resources. As a result, these competitors may be better able to
withstand a change in conditions within the industries in which we operate, a
change in the prices of raw materials or a change in the economy as a whole. Our
competitors can be expected to continue to develop and introduce new and
enhanced products, which could cause a decline in market acceptance of our
chemical products. Current and future consolidation among our competitors and
customers may also cause a loss of market share as well as put downward pressure
on pricing. Our competitors could cause a reduction in the prices for some of
our chemical products as a result of intensified price competition. Competitive
pressures can also result in the loss of major customers. If we cannot compete
successfully, our business, financial condition and results of operations could
be adversely affected.
WE FACE
COMPETITION FROM OTHER CHEMICAL COMPANIES, WHICH COULD FORCE US TO LOWER OUR
PRICES THEREBY ADVERSELY AFFECTING OUR OPERATING MARGINS, FINANCIAL CONDITION,
CASH FLOWS AND PROFITABILITY.
The
markets in which we operate are highly competitive, and this competition could
harm our business, results of operations, cash flow and financial condition. Our
competitors include major international producers as well as smaller regional
competitors. We believe that a significant competitive factor for our products
is selling price. We could be subject to adverse results caused by our
competitors’ pricing decisions. In addition, current and possible future
consolidation among our competitors and customers may cause us to lose market
share as well as put downward pressure on pricing. Furthermore, there is a trend
in the chemical industry toward relocation of manufacturing facilities to
lower-cost regions. Such relocation may permit some of our competitors to lower
their costs and improve their competitive position. Some of our competitors are
larger, have greater financial resources and have less debt than we do. As a
result, those competitors may be better able to withstand a change in conditions
within our industry and throughout the economy as a whole. If we do not compete
successfully, our business, operating margins, financial condition, cash flows
and profitability could be adversely affected.
FAILURE
TO DEVELOP NEW CHEMICAL PRODUCTS AND/OR IMPROVE OUR EXISTING PRODUCTS WILL MAKE
US LESS COMPETITIVE.
Our
results of operations depend, in part, on our ability to expand our chemical
product offerings. We are committed to remaining a competitive producer and
believe that our portfolio of new or re-engineered products is strong. However,
we may not be able to continue to develop new products, re-engineer our existing
products successfully or bring them to market in a timely manner. While we
believe that the products, pricing and services we offer customers are
competitive, we may not be able to continue to attract and retain customers to
which to sell our chemical products.
FAILURE
TO MAKE CONTINUED IMPROVEMENTS IN OUR PRODUCTIVITY COULD HURT OUR COMPETITIVE
POSITION.
In order
to obtain and maintain a competitive position, we believe that we must continue
to make improvements in our productivity. When we invest in new technologies or
processes, we face risks related to cost overruns and unanticipated
technical difficulties. Our inability to anticipate, respond to or utilize
changing technologies could have a material adverse effect on our business and
our results of operations.
CHANGES
IN OUR CUSTOMERS’ PRODUCTS COULD REDUCE THE DEMAND FOR OUR CHEMICAL PRODUCTS,
WHICH MAY DECREASE OUR NET SALES AND OPERATING MARGINS.
Our
chemical products are used for a broad range of applications by our customers.
Changes, including technological changes, in our customers’ products or
processes may make our chemical products unnecessary, which would reduce the
demand for those products. Other customers may find alternative materials or
processes that no longer require our products. If the demand for our chemical
products is reduced, our net sales and operating margins may be reduced as
well.
WE HAVE
FEW PROPRIETARY RIGHTS WITH RESPECT TO OUR CHEMICAL PRODUCTS, THE LACK OF WHICH
MAY MAKE IT EASIER FOR OUR COMPETITORS TO COMPETE AGAINST US.
None of
our chemical products are protected by patents. We do attempt to protect the
names of some of our chemical products through trademarks and some of our other
limited proprietary property through trade secret, nondisclosure and
confidentiality measures; however, such protections may not preclude competitors
from developing similar technologies.
RISKS
RELATING TO OUR ELECTRONICS BUSINESS
SMI,
ACTION AND IHS OUTSOURCE THE MANUFACTURING OF THEIR PRODUCTS TO US AND IF OUR
OPERATIONS ARE INTERRUPTED OR IF OUR ORDERS EXCEED OUR MANUFACTURING
CAPABILITIES, THEY MAY NOT BE ABLE TO DELIVER THEIR PRODUCTS TO CUSTOMERS ON
TIME.
Pursuant
to individual manufacturing agreements between SMI, IHS and us, we are the
exclusive manufacturer of the products of SMI and IHS. We also manufacture all
of the electronic products sold by Action. We operate a single
facility and have limited capacity that may be inadequate if SMI’s, Action’s or
IHS’s customers place orders for unexpectedly large quantities of their
products, or if our other customers place large orders of products, which could
limit our ability to produce the products of SMI, Action or IHS. In addition, if
our operations were halted or restricted, even temporarily, or we are unable to
fulfill large orders, SMI, Action and IHS could experience business
interruption, increased costs, damage to their reputations and loss of their
customers. Although SMI and IHS have the right to utilize other manufacturers if
we are unable to perform under our agreement, manufacturers of their products
need to be licensed with the FDA, and identifying and qualifying a new
manufacturer to replace us as the manufacturer of their products could take
several months during which time, they would likely lose customers and our
revenues could be materially delayed and/or reduced. In addition, our failure to
produce such products could result in claims against us. See “Item 1. Business -
Manufacturer and Suppliers.”
WE DEPEND
ON A LIMITED NUMBER OF SUPPLIERS FOR THE COMPONENTS AND RAW MATERIALS USED IN
OUR PRODUCTS AND THE PRODUCTS MANUFACTURED FOR THIRD PARTIES, INCLUDING SMI AND
IHS, AND ANY INTERRUPTION IN THE AVAILABILITY OF THESE COMPONENTS AND RAW
MATERIALS COULD REDUCE OUR REVENUE.
We rely
on a limited number of suppliers for the components and raw materials used in
the products that we manufacture for others, including SMI, Action and IHS.
Although there are many suppliers for each of their component parts and raw
materials, we are dependent on a single or limited number of suppliers for many
of the significant components and raw materials due to our customers’
specifications. This reliance involves a number of significant risks,
including:
|
●
|
unavailability
of materials and interruptions in delivery of components and raw materials
from suppliers;
|
|
●
|
manufacturing
delays caused by such unavailability or interruptions in delivery;
and
|
|
●
|
fluctuations
in the quality and the price of components and raw
materials.
|
We do not
have any long-term or exclusive purchase commitments with any of our suppliers.
Failure to maintain existing relationships with suppliers or to establish new
relationships in the future could also negatively affect our ability to obtain
components and raw materials used in these products in a timely manner. If we
are unable to obtain ample supply of product from existing suppliers or
alternative sources of supply, we may be unable to satisfy our customers’ orders
which could reduce our revenues and adversely affect our relationships with
these customers. See “Item 1. Business - Manufacturers and
Suppliers.”
OUR
ABILITY TO EXECUTE OUR BUSINESS PLAN DEPENDS ON THE SCOPE OF OUR INTELLECTUAL
PROPERTY RIGHTS AND NOT INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
THE VALIDITY, ENFORCEABILITY AND COMMERCIAL VALUE OF THESE RIGHTS ARE HIGHLY
UNCERTAIN.
Our
ability to compete effectively with other companies is materially dependent upon
the proprietary nature of our technologies. We rely primarily on patents and
trade secrets to protect our medical device technologies.
Third
parties may seek to challenge, invalidate, circumvent or render unenforceable
any patents or proprietary rights owned by us based on, among other
things:
|
●
|
subsequently
discovered prior art;
|
|
●
|
lack
of entitlement to the priority of an earlier, related application;
or
|
|
●
|
failure
to comply with the written description, best mode, enablement or other
applicable requirements.
|
In
general, the patent position of medical device companies are highly uncertain,
still evolving and involve complex legal, scientific and factual questions. We
are at risk that:
|
●
|
other
patents may be granted with respect to the patent applications filed by
us; and
|
|
●
|
any
patents issued to us may not provide commercial benefit to us or will be
infringed, invalidated or circumvented by
others.
|
The
United States Patent and Trademark Office currently has a significant backlog of
patent applications, and the approval or rejection of patents may take several
years. Prior to actual issuance, the contents of United States patent
applications are generally published 18 months after filing. Once issued, such a
patent would constitute prior art from its filing date, which might predate the
date of a patent application on which we rely. Conceivably, the issuance of such
a prior art patent, or the discovery of “prior art” of which we are currently
unaware, could invalidate a patent of ours or prevent commercialization of a
product claimed thereby.
Although
we generally conduct a cursory review of issued patents prior to engaging in
research or development activities, we may be required to obtain a license from
others to commercialize any of our new products under development. If patents
that cover our existing or new products are issued to other companies, there can
be no assurance that any necessary license could be obtained on favorable terms
or at all.
There can
be no assurance that we will not be required to resort to litigation to protect
our patented technologies and other proprietary rights or that we will not be
the subject of additional patent litigation to defend our existing and proposed
products and processes against claims of patent infringement or any other
intellectual property claims. Such litigation could result in substantial costs,
diversion of management’s attention, and diversion of our
resources.
We also
have applied for patent protection in several foreign countries. Because of the
differences in patent laws and laws concerning proprietary rights between the
United States and foreign countries, the extent of protection provided by
patents and proprietary rights granted to us by the United States may differ
from the protection provided by patents and proprietary rights granted to us by
foreign countries.
We
attempt to protect our trade secrets, including the processes, concepts, ideas
and documentation associated with our technologies, through the use of
confidentiality agreements and non-competition agreements with our current
employees, and with other parties to whom we have divulged such trade secrets
with the exception of our CEO, Andre DiMino. If our employees or other parties
breach our confidentiality agreements and non-competition agreements or if these
agreements are not sufficient to protect our technology or are found to be
unenforceable, our competitors could acquire and use information that we
consider to be our trade secrets and we may not be able to compete effectively.
Most of our competitors have substantially greater financial, marketing,
technical and manufacturing resources than we have and we may not be profitable
if our competitors are also able to take advantage of our trade
secrets.
We may
decide for business reasons to retain certain knowledge that we consider
proprietary as confidential and elect to protect such information as a trade
secret, as business confidential information or as know-how. In that event, we
must rely upon trade secrets, know-how, confidentiality and non-disclosure
agreements and continuing technological innovation to maintain our competitive
position. There can be no assurance that others will not independently develop
substantially equivalent proprietary information or otherwise gain access to or
disclose such information.
IF THE
FDA OR OTHER STATE OR FOREIGN AGENCIES IMPOSE REGULATIONS THAT AFFECT OUR
MEDICAL DEVICE PRODUCTS, OUR DEVELOPMENT, MANUFACTURING AND MARKETING COSTS WILL
BE INCREASED.
The
testing and production of medical devices are subject to regulation by the FDA
as devices under the 1976 Medical Device Amendments to the Federal Food, Drug
and Cosmetic Act. In the United States, medical devices must be:
|
●
|
manufactured
in registered and quality approved establishments by the FDA;
and
|
|
●
|
produced
in accordance with the FDA Quality System Regulation (“QSR”) for medical
devices.
|
As a
result we, as the manufacturer of other parties’ devices, are required to comply
with QSR requirements and if we fail to comply with these requirements, these
other third parties will need to find another company to manufacture its
devices. In addition, the Company’s manufacturing facility:
|
●
|
is
required to be registered as a medical device manufacturing facility with
the FDA; and
|
|
●
|
is
subject to inspection by the FDA.
|
The FDA
can impose civil and criminal enforcement actions and other penalties on us if
we fail to comply with stringent FDA regulations.
Medical
device manufacturing facilities must maintain records, which are available for
FDA inspectors documenting that the appropriate manufacturing procedures were
followed. The FDA has authority to conduct inspections of our facility. Labeling
and promotional activities are also subject to scrutiny by the FDA and, in
certain instances, by the Federal Trade Commission. Any failure by us or the
manufacturer of our products to take satisfactory corrective action in response
to an adverse inspection or to comply with applicable FDA regulations could
result in enforcement action against us or our manufacturer, including a public
warning letter, a shutdown of manufacturing operations, a recall of our
products, civil or criminal penalties or other sanctions. From time to time, the
FDA may modify such requirements, imposing additional or different requirements
which may require us to alter our business methods which could result in
increased expenses.
RISKS
RELATED TO OUR COMPANY
WE HAVE A
HISTORY OF SIGNIFICANT AND CONTINUED OPERATING LOSSES AND A SUBSTANTIAL
ACCUMULATED EARNINGS DEFICIT AND WE MAY CONTINUE TO INCUR SIGNIFICANT
LOSSES.
We have
incurred substantial net losses of approximately $1.2 million and $8.9 million
for the fiscal years ended March 31, 2010 and 2009, respectively. At March 31,
2010, we had an accumulated deficit of $31 million. We expect to incur
additional operating losses, as well as negative cash flow from operations, for
the foreseeable future.
The loss
or significant reduction in business of any of our key customers could
materially and adversely affect our revenues and earnings.
We are
highly dependent upon certain customers to generate our revenues. For the fiscal
year ended March 31, 2010, three customers accounted for 50% of revenue and for
the fiscal year ended March 31, 2009, two customers accounted 54% of our
revenues. All customer purchases are made through purchase orders and we do not
have any long-term contracts with customers. The complete loss of, or
significant reduction in business from, or a material adverse change in the
financial condition of, any of such customers will cause a material and adverse
change in our revenues and operating results.
WE MAY BE
EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROL OVER FINANCIAL
REPORTING AND OUR ABILITY TO HAVE THE OPERATING EFFECTIVENESS OF OUR INTERNAL
CONTROLS ATTESTED TO BY OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) the
Securities and Exchange Commission (“SEC”) adopted rules requiring public
companies to include a report of management on the company’s internal control
over financial reporting in their annual reports on Form 10-K. A report of our
management is included in our Annual Report on Form 10-K. In addition, Section
404 requires the independent registered public accounting firm auditing a
company’s financial statements to also attest to and report on the operating
effectiveness of such company’s internal control over financial reporting
commencing with our annual report for the fiscal year ending March 31, 2011. We
can provide no assurance that we will be able to comply with all of the
requirements imposed thereby. There can be no assurance that we will receive a
positive attestation from our independent registered public accounting firm. In
the event we identify significant deficiencies or material weaknesses in our
internal control over financial reporting that we cannot remediate in a timely
manner or we are unable to receive a positive attestation from our independent
registered public accountants with respect to our internal control over
financial reporting, investors and others may lose confidence in the reliability
of our financial statements.
WE MAY BE
EXPOSED TO PRODUCT LIABILITY CLAIMS FOR WHICH OUR INSURANCE MAY BE
INADEQUATE.
Our
business exposes us to potential product liability risks, which are inherent in
the testing, manufacturing and marketing of chemical products and electronic
devices. Although we maintain a general liability insurance policy, which
includes aggregate product liability coverage of $7,000,000 for certain of our
products, there can be no assurance, that such insurance will be sufficient to
cover potential claims or that the present level of coverage will be available
in the future at a reasonable cost.
While we
are not aware of side-effects resulting from the use of any of our products,
there may be unknown long-term effects of their use that may result in product
liability claims in the future. Further, we cannot provide any assurance
that:
|
●
|
our
insurance will provide adequate coverage against potential liabilities if
a product causes harm or fails to perform as promised;
|
|
●
|
adequate
product liability insurance will continue to be available in the future;
or
|
|
●
|
our
insurance can be maintained on acceptable terms.
|
|
|
|
The
obligation to pay any product liability claim in excess of whatever insurance we
are able to obtain would increase our expenses and could greatly reduce our
assets. See “Item 1. Business - Insurance.”
THE LOSS
OF ANY OF OUR EXECUTIVE OFFICER OR KEY PERSONNEL MAY ADVERSELY AFFECT OUR
OPERATIONS AND OUR ABILITY TO EXECUTE OUR GROWTH STRATEGY.
Our
ability to execute our business plan depends upon the continued services of
Andre’ DiMino, our President and Chief Executive Officer, as well as our key
technology, marketing, sales and support personnel. We do not have employment or
consulting agreements containing non-compete agreements with Mr. DiMino and
certain of our key personnel, and we may not be able to retain these
individuals. If we lost the services of Mr. DiMino or our key personnel, our
business may be adversely affected and our stock price may decline. In addition,
our ability to execute our business plan is dependent on our ability to attract
and retain additional highly skilled personnel.
OUR
EXECUTIVE OFFICER AND DIRECTORS AND ENTITIES AFFILIATED WITH THEM HAVE
SUBSTANTIAL CONTROL OVER US, WHICH COULD DELAY OR PREVENT A CHANGE IN OUR
CORPORATE CONTROL FAVORED BY OUR OTHER SHAREHOLDERS.
Our
executive officer and directors and entities affiliated with them may be deemed
to beneficially own, in the aggregate, approximately 38.8% of our outstanding
common stock. In particular, Mr. DiMino, together with members of the DiMino
family, may be deemed to beneficially own approximately 35.1% of the outstanding
shares of our common stock. The interests of our current officer and director
shareholders may differ from the interests of our other shareholders. As a
result, the current officers and directors would have the ability to exercise
substantial control over all corporate actions requiring shareholder approval,
irrespective of how our other shareholders may vote, including the following
actions:
|
●
|
the
election of directors;
|
|
●
|
adoption
of stock option plans;
|
|
●
|
the
amendment of charter documents; or
|
|
●
|
the
approval of certain mergers and other significant corporate transactions,
including a sale of substantially all of our
assets.
|
PENNY
STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON MARKETABILITY OF OUR
SECURITIES.
Our
common stock is subject to penny stock rules, which may discourage
broker-dealers from effecting transactions in our common stock or affect their
ability to sell our securities. As a result, purchasers and current holders of
our securities could find it more difficult to sell their securities. Our stock
is traded on the OTC Bulletin Board. Trading volume of OTC Bulletin Board stocks
have been historically lower and more volatile then stocks traded on an exchange
or the Nasdaq Stock Market. In addition we may be subject to rules of the
Securities and Exchange Commission that impose additional requirements on
broker-dealers when selling penny stocks to persons other than established
customers and accredited investors. In general, an accredited investor is a
person with assets in excess of $1,000,000 or annual income exceeding $200,000
individually, or $300,000 together with his or her spouse. The relevant
Securities Exchange Commission regulations generally define penny stocks to
include any equity security not traded on an exchange or the Nasdaq Stock Market
with a market price (as defined in the regulations) of less than $5 per share.
Under the penny stock regulations, a broker-dealer must make a special
suitability determination as to the purchaser and must have the purchaser’s
prior written consent to the transaction. Prior to any transaction in a penny
stock covered by these rules, a broker-dealer must deliver a disclosure schedule
about the penny stock market prepared by the Securities Exchange Commission.
Broker-dealers must also make disclosure concerning commissions payable to both
the broker-dealer and any registered representative and provide current
quotations for the securities. Finally, broker-dealers are required to send
monthly statements disclosing recent price information for the penny stock held
in an account and information on the limited market in penny
stocks.
OUR STOCK
PRICE, LIKE THAT OF MANY SMALL COMPANIES, HAS BEEN AND MAY CONTINUE TO BE
VOLATILE.
We expect
that the market price of our common stock will fluctuate as a result of
variations in our quarterly operating results and other factors beyond our
control. These fluctuations may be exaggerated if the trading volume of our
common stock is low.
WE HAVE
NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE,
AND ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF YOUR
STOCK.
We have
never paid any cash dividends on our common stock and do not anticipate paying
any cash dividends on our common stock in the foreseeable future and any return
on investment may be limited to the value of your stock. We plan to retain any
future earnings to finance growth.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not
applicable
ITEM 2.
PROPERTIES
We are
headquartered at 224 Pegasus Avenue, Northvale, New Jersey. We lease
approximately 16,000 square feet of combined office and warehouse space from an
unaffiliated third party with a monthly rent of $8,073 subject to annual
increases. The lease expires in June, 2018. The Company,
its subsidiaries and IHS utilize portions of the leased space. Pursuant to a
management services agreement to which the Company, its subsidiaries and IHS are
parties, the Company determines, on a monthly basis, the portion of space
utilized by each entity during such month, and each entity reimburses the
Company for their portion of the lease costs, real property taxes and related
costs.
We
believe that our existing facilities are suitable as office, storage, laboratory
and manufacturing space, and are adequate to meet our current needs. We further
believe that such properties are adequately covered by insurance.
We do not
own any real property for use in our operations or otherwise.
ITEM 3.
LEGAL PROCEEDINGS
We are
not a party to, and none of our property is the subject of, any pending legal
proceedings other than routine litigation that is incidental to our business. To
our knowledge, no governmental authority is contemplating any such
proceedings.
ITEM 4.
REMOVED AND RESERVED
PART
II
| ITEM
5. |
MARKET FOR
REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY
SECURITIES. |
MARKET
INFORMATION
The
Company’s common stock trades on the OTC-Bulletin Board under the symbol
“ADMT.” For the periods indicated, the following table sets forth the
high and low bid quotations for the Company’s common stock, as reported by the
National Quotation Bureau, Inc. The quotations represent inter-dealer quotations
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
|
Quarter
Ended
|
|
High
Bid
|
|
|
Low
Bid
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2009
|
|
|
|
|
|
|
|
June
30, 2008
|
|
$ |
0.19 |
|
|
$ |
0.11 |
|
|
September
30, 2008
|
|
$ |
0.16 |
|
|
$ |
0.06 |
|
|
December
31, 2008
|
|
$ |
0.07 |
|
|
$ |
0.03 |
|
|
March
31, 2009
|
|
$ |
0.07 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2010
|
|
|
|
|
|
|
|
|
|
June
30, 2009
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
September
30, 2009
|
|
$ |
0.03 |
|
|
$ |
0.02 |
|
|
December
31, 2009
|
|
$ |
0.07 |
|
|
$ |
0.01 |
|
|
March
31, 2010
|
|
$ |
0.02 |
|
|
$ |
0.01 |
|
HOLDERS
OF RECORD
As of
June 29, 2010, 53,939,537 shares of the Company’s common stock were issued and
outstanding. On June 29, 2010 there were 1,336 shareholders of
record.
DIVIDENDS
The
Company has never paid any cash dividends on its common stock and has no
intention of paying cash dividends in the foreseeable future. The Company
intends to retain all earnings, if any, for use in the operation and expansion
of its business.
EQUITY
COMPENSATION PLAN
As of
June 29, 2010, we did not have any compensation plans (including individual
compensation arrangements) under which our equity securities were authorized for
issuance. Andre DiMino our Chief Executive Officer and Chief Financial Officer
has option awards as follows:
| Number of
unexercised options |
|
1,300,000 |
| Option Exercise
Price ($) |
|
.29 |
| Option Expiration
Date |
|
8/30/2011 |
ITEM 6.
SELECTED FINANCIAL DATA.
Not
Applicable
| ITEM
7. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION |
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K 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 Form 10-K 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 this Annual Report on Form
10-K.
CRITICAL
ACCOUNTING POLICIES
REVENUE
RECOGNITION
CHEMICAL
PRODUCTS:
Revenues
are recognized when products are shipped to end users. Shipments to distributors
are recognized as sales where no right of return exists.
ELECTRONICS:
We
recognize revenue from the sale of our electronic products when they are shipped
to the purchaser. Revenue from the sale of the electronics we
manufacture for IHS is recognized upon completion of the manufacturing process
and shipment of product. Shipping and handling charges and costs are
immaterial. We offer a limited 90 day warranty on our electronics products and a
limited 5 year warranty on our electronic controllers for spas and hot
tubs. We have no other post shipment obligations and sales returns
have been immaterial.
USE OF
ESTIMATES:
Our
discussion and analysis of our financial condition and results of operations is
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.
RECENTLY
ADOPTED ACCOUNTING PRONOUNCEMENTS
In June
2009, the Financial Accounting Standards Board (“FASB”) issued the FASB
Accounting Standards Codification (“Codification”) as the single source of
authoritative non-governmental U.S. GAAP which was launched on July 1,
2009. The Codification is a new structure which takes accounting pronouncements
and organizes them by approximately ninety accounting topics. The Codification
is now the single source of authoritative U.S. GAAP. All guidance included in
the Codification is now considered authoritative, even guidance that comes from
what is currently deemed to be a non-authoritative section of a standard. Upon
the Codification’s effective date, all non-grandfathered, non-SEC accounting
literature not included in the Codification has become non-authoritative. The
Codification’s effective date for interim and annual periods was
September 15, 2009. The Codification is for disclosure only and has not
impacted the Company’s financial condition or results of operations. The Company
has adopted the Codification, and reflects such adoption throughout this
filing.
Management
does not believe that any other recently issued, but not yet effective
accounting pronouncement, if adopted, would have a material effect on the
accompanying condensed consolidated financial statements.
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, 2010 and 2009, our
operations were conducted through ADM itself and its subsidiaries, Pegasus
Laboratories, Inc. and Sonotron Medical Systems, Inc and since August 2008,
Action Industries Unlimited, LLC. ITI was deconsolidated as of October 18, 2006
upon the consummation of ITI’s initial public offering. Our investment in ITI
from October 18, 2006 through March 31, 2008 was reported under the equity
method of accounting. Since April 1, 2008 we reported our investment in ITI at
fair value. As reported by ITI, on February 12, 2010 all of ITI’s
assets were acquired by IHS, an unaffiliated entity controlled by ITI’s former
Chairman of the Board.
We are a
technology-based developer and manufacturer of diversified lines of products in
the following four areas: (1) environmentally safe chemical products for
industrial use, (2) the manufacturing and sale of electronic medical and other
devices,(3) cosmetic and topical dermatological products, and (4) anti-static
conductive paints, coatings and other 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 electronic devices and topical
dermatological products. However, during the fiscal year ended March
31, 2009, we derived an increased amount of our revenue from the sale/rental and
manufacturing of electronic devices. This revenue was significantly decreased by
the amount of $441,556 in the fiscal year ended March 31, 2010. Our electronics
segment also includes our Sonotron and Action subsidiaries.
RESULTS
OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2010 AS COMPARED TO MARCH 31,
2009
REVENUES
AND GROSS MARGINS
Revenues
were $1,166,591 for the year ended March 31, 2010 as compared to $1,486,283 for
the year ended March 31, 2009, a decrease of $319,692, or 22%. The decrease
mainly resulted from a decrease in sales of finished medical devices to our
affiliate, ITI, and IHS of approximately $489,917, and a decrease in sales to
new and existing electronic customers from our Action electronic subsidiary in
the amount of $16,699. Spas are luxury or discretionary items, and due to the
poor economic condition demand has been reduced for related products from our
Action subsidiary. These decreases were partially offset by an increase in sales
to chemical customers in our new Anti-static Industries division in the amount
of $69,450, and an increase in sales to an existing electronic customer in the
amount of $57,128.
Gross
profits and gross margins were $464,833, or 40%, and $405,212, or 27%, an
increase of $59,621 or 15% for the years ended March 31, 2010 and 2009,
respectively. Gross profit percentages increased from sales of our chemical
products by 7% mainly due to an overall increase in chemical sales, including
our new Anti-static Industries division in the amount of $68,810, and as a
result of a 12% decrease in labor cost percentages in fiscal year 2010,
partially offset by a slight decrease in gross profit percentages from raw
materials and finished goods. Gross profit percentages decreased 15% from sales
of our electronic devices as a result of increased labor cost percentages;
electronic segment inventory cost adjustments and the write off of obsolete
inventory, partially offset by slight increased gross profit percentages from
the cost of our materials and finished goods.
OPERATING
LOSS
Loss from
operations for the year ended March 31, 2010 was $510,905, compared to a loss
from operations for the year ended March 31, 2009 of $707,487, a decrease of
$196,582, or 28%. Selling, general and administrative expenses decreased by
$164,956, or 15%, from $1,112,699 to $947,743, mainly due to decreased
compensation and health insurance costs in the amount of $220,326, decreased
computer costs in the amount of $33,323, decreased commissions in the
amount of $17,586 and decreased advertising costs in the amount of $7,417,
partially offset by an increase in depreciation and amortization in the amount
of $24,126, accounting fees in the amount of $43,872 and insurance in the amount
of $16,937. And additionally offset by a write off of the net book value of an
intangible asset, customer lists, for our Action subsidiary in the amount of
$29,510 due to recognition of an impairment loss. Compensation and health
insurance costs decreased due to an overall staff reduction, a portion of
officer’s salary being charged to Wellington Scientific for services, in
addition to a decrease in wages paid to an officer and a portion of accounting
services not being performed in-house, previously performed in-house. Computer
costs decreased due to additional expenses in fiscal year 2009 for
implementation of a new accounting software. Commissions decreased as we are no
longer paying commissions related to the aqua resin product line, which is no
longer being carried at ADM. Depreciation increased as a result of the
acquisition of assets from Anti-static Industries of Delaware, Inc. in July
2009, now being depreciated, and as a result of a full year of depreciation
related to the acquisition of Action Industries, acquired in September of 2008.
Accounting fees increased as a portion of accounting services are now performed
by an outside consultant. There was an increase in insurance due to an increase
in insurance for our Action subsidiary and for our anti-static business.
Research and development expenses increased by $27,995, or 100%, from $0 to
$27,995, as a result of new research and development activities during the year
ended March 31, 2010. Research and development activities were previously
performed in house, and are now being performed by an outside consultant. Cost
of sales decreased by $379,313, or 35%, from $1,081,071 to $701,758, primarily
as a result of the decrease in sales to ITI and IHS, partially offset by an
increase in cost of sales due to the mix of products sold in the chemical
division including an increase in sales in the new Antistatic chemical division,
and a slight increase in cost of sales in the electronics division due to
increase in sales to an existing electronics customer.
NET LOSS
AND NET LOSS PER SHARE
Net loss
for the year ended March 31, 2010 was $1,219,225, or $(0.02) per share, compared
to a net loss of $8,899,132, or $(0.16) per share, for the year ended March 31,
2009. Our net loss decreased $7,679,907, or $(0.14) per share. This
was mainly the result of a decrease in the loss from the change in fair value of
our investment in ITI of $9,945,000 from $10,660,000 for the year ended March
31, 2009, to $715,000, writing the investment down to $0, in the year ended
March 31, 2010, offset by a deferred tax benefit recorded in the year ended
March 31, 2009 of $2,425,188.
LIQUIDITY
AND CAPITAL RESOURCES
At March
31, 2010, we had cash and cash equivalents of $690,975 as compared to $1,155,786
at March 31, 2009. The decrease of $464,811 was primarily the result of cash
used in operations in the amount of $360,743 and cash used in investing
activities of $91,068. We intend to continue to use our cash for increased
marketing costs, and the related administrative expenses, in an effort to
increase our revenue. We expect to have enough cash to fund
operations for the next twelve months. Our note payable to Kearny
Federal Savings Bank of $184,000 on March 31, 2010, is secured and
collateralized by restricted cash of $228,842. This note bears an interest rate
of 2.98% per annum.
On July
17, 2009 we purchased the assets of Anti-static Industries of Delaware, Inc. a
company involved in the research, development and manufacture of water-based and
proprietary electrically conductive paints, coatings and other products and
accessories. The purchase price for the assets was $66,920 of
which $38,520 was paid during the year and the balance of $28,400 is a note
payable, bearing an imputed interest rate of 3.5% per annum, which will be
repaid in equal installments over the next 17 months.
OPERATING
ACTIVITIES
Net cash
used by operating activities was $360,743 for the year ended March 31, 2010, as
compared to net cash used by operating activities of $685,880 for the year ended
March 31, 2009. The use of cash during the year ended March 31, 2010 was
primarily due to a net loss of $1,219,225 and an increase in operating
liabilities of $18,027, which was primarily offset by a change in the fair
market value of our investment in ITI of $715,000, and non-cash charge for
depreciation of $62,346 and decrease in net operating assets of
$31,690.
The use
of cash in 2009 was primarily due to a net loss of $8,899,132 and a net decrease
in operating assets of $229,799, which was primarily offset by a non-cash charge
for the equity investment loss of $10,660,000, depreciation of $38,218, and
decreases in net operating liabilities of $291,991, offset by a deferred tax
benefit of $2,425,188.
INVESTING
ACTIVITIES
For the
year ended March 31, 2010, net cash used by investing activities was
$91,068. The primary use of cash was for an investment in cash and
services rendered of $50,000 in Wellington Scientific LLC for the issuance of a
secured convertible note with an interest rate of 10%. In addition we made
payments in the amount of $38,520, towards a total purchase price of $66,920
related to the asset purchase agreement with Antistatic Industries of Delaware,
Inc., whereby we acquired intangible assets of $45,446, machinery and equipment
of $10,000 and inventory in the amount of $11,474.
For the
year ended March 31, 2009, cash used in investing activities was $427,659. Of
this amount, $14,888 was used for the purchase of equipment and $26,300 was
received from an officer for repayment of advances made to the officer prior to
2000. We acquired intangible assets of $212,491. Restricted cash which increased
$226,580, was used to collateralize the $200,000 note whose proceeds were used
for the acquisition of Action.
FINANCING
ACTIVITIES
For the
year ended March 31, 2010, net cash used for financing activities was $13,000,
which was used for repayment on a note from a commercial bank to facilitate our
acquisition of substantially all of the assets of Action.
During
the year ended March 31, 2009, we had net proceeds from notes payable of
$200,000, of which we repaid $3,000.
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.
Inflation
We
believe our operations have not been and, in the foreseeable future, will not be
materially and adversely affected by inflation or changing prices.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
ITEM 7A.
QUANTATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not
Applicable
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ADM
TRONICS UNLIMITED, INC. AND SUBSIDIARIES
MARCH 31,
2010
I N D E
X
|
FINANCIAL
STATEMENTS:
|
Page
NO.
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
|
|
|
Consolidated
Balance Sheets as of March 31, 2010 and 2009
|
F-2
|
|
|
|
|
|
|
Consolidated
Statements of Operations For the Years Ended March 31, 2010 and
2009
|
F-3
|
|
|
|
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity For the Years Ended March
31, 2010 and 2009
|
F-4
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows For the Years Ended March 31, 2010 and
2009
|
F-5
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of ADM Tronics Unlimited, Inc.
We have
audited the accompanying consolidated balance sheets of ADM Tronics Unlimited,
Inc. and subsidiaries as of March 31, 2010 and 2009, and the related
consolidated statements of operations, changes in stockholders’ equity, and cash
flows for each of the two years then ended. These consolidated financial
statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ADM Tronics Unlimited, Inc. and
subsidiaries as of March 31, 2010 and 2009, and the results of its operations
and its cash flows for each of the two years then ended in conformity with
accounting principles generally accepted in the United States of
America.
/s/ Raich
Ende Malter & Co. LLP
East
Meadow, New York
June 29,
2010
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
ADM
TRONICS UNLIMITED, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
March
31, 2010
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
690,975 |
|
|
$ |
1,155,786 |
|
|
Accounts
receivable, net of allowance for doubtful
|
|
|
|
|
|
|
|
|
|
accounts
of $5,352 and $2,500, respectively
|
|
|
111,484 |
|
|
|
105,134 |
|
|
Due
from affiliates
|
|
|
- |
|
|
|
6,977 |
|
|
Inventories
|
|
|
178,629 |
|
|
|
302,810 |
|
|
Prepaid
expenses and other current assets
|
|
|
25,898 |
|
|
|
23,412 |
|
|
Restricted
cash
|
|
|
228,842 |
|
|
|
226,580 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
1,235,828 |
|
|
|
1,820,699 |
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net of accumulated depreciation
|
|
|
|
|
|
|
|
|
|
of
$41,983 and $28,082, respectively
|
|
|
56,065 |
|
|
|
59,968 |
|
|
Inventory
- long term portion
|
|
|
33,802 |
|
|
|
43,798 |
|
|
Investment
in ITI - at Fair Market Value
|
|
|
- |
|
|
|
715,000 |
|
|
Secured
convertible note
|
|
|
52,342 |
|
|
|
- |
|
|
Advances
to related parties
|
|
|
48,285 |
|
|
|
47,999 |
|
|
Intangible
assets, net of accumulated amortization
|
|
|
|
|
|
|
|
|
|
of
$95,517 and $80,056, respectively
|
|
|
161,697 |
|
|
|
194,204 |
|
|
Other
assets
|
|
|
16,109 |
|
|
|
18,763 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,604,128 |
|
|
$ |
2,900,431 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
122,841 |
|
|
$ |
116,137 |
|
|
Note
payable – bank
|
|
|
184,000 |
|
|
|
197,000 |
|
|
Note
payable - other
|
|
|
17,400 |
|
|
|
- |
|
|
Accrued
expenses and other current liabilities
|
|
|
40,813 |
|
|
|
38,970 |
|
|
Customer
deposits – ITI
|
|
|
- |
|
|
|
101,025 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
365,054 |
|
|
|
453,132 |
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable - other, net of current maturities
|
|
|
11,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
376,054 |
|
|
|
453,132 |
|
|
|
|
|
|
|
|
|
|
|
|
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,
53,939,537 shares issued and outstanding at
|
|
|
|
|
|
|
|
|
|
March
31, 2010 and March 31, 2009
|
|
|
26,970 |
|
|
|
26,970 |
|
|
Additional
paid-in capital
|
|
|
32,153,597 |
|
|
|
32,153,597 |
|
|
Accumulated
deficit
|
|
|
(30,952,493 |
) |
|
|
(29,733,268 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
1,228,074 |
|
|
|
2,447,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
1,604,128 |
|
|
$ |
2,900,431 |
|
|
The
accompanying notes are an integral part of these
|
|
consolidated
financial statements.
|
|
ADM
TRONICS UNLIMITED, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
FOR
THE YEARS ENDED MARCH 31, 2010 and
2009
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,166,591 |
|
|
$ |
1,486,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
701,758 |
|
|
|
1,081,071 |
|
|
Research
and development
|
|
|
27,995 |
|
|
|
- |
|
|
Selling,
general and administrative
|
|
|
947,743 |
|
|
|
1,112,699 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,677,496 |
|
|
|
2,193,770 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(510,905 |
) |
|
|
(707,487 |
) |
|
|
|
|
|
|
|
|
|
|
|
Interest
income, net
|
|
|
6,680 |
|
|
|
43,167 |
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of investment
|
|
|
(715,000 |
) |
|
|
(10,660,000 |
) |
|
in
ITI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
- |
|
|
|
2,425,188 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
($ |
1,219,225 |
) |
|
($ |
8,899,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share, basic and diluted
|
|
($ |
0.02 |
) |
|
($ |
0.16 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding, basic and diluted
|
|
|
53,939,537 |
|
|
|
53,939,537 |
|
|
The
accompanying notes are an integral part of these
|
|
consolidated
financial statements.
|
|
ADM
TRONICS UNLIMITED, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
FOR
THE YEARS ENDED MARCH 31, 2010 AND
2009
|
|
|
|
Common
Stock Shares
|
|
|
Common
Stock Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2008
|
|
|
53,939,537 |
|
|
$ |
26,970 |
|
|
$ |
32,153,597 |
|
|
($ |
27,629,430 |
) |
|
$ |
4,551,137 |
|
|
Adjustment
to adopt FAS 159:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITI
investment adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,220,482 |
|
|
|
9,220,482 |
|
|
Deferred
tax credit adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,425,188 |
) |
|
|
(2,425,188 |
) |
|
Net
Loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,899,132 |
) |
|
|
(8,899,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2009
|
|
|
53,939,537 |
|
|
|
26,970 |
|
|
|
32,153,597 |
|
|
|
(29,733,268 |
) |
|
|
2,447,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,219,225 |
) |
|
|
(1,219,225 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2010
|
|
|
53,939,537 |
|
|
$ |
26,970 |
|
|
$ |
32,153,597 |
|
|
($ |
30,952,493 |
) |
|
$ |
1,228,074 |
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
ADM
TRONICS UNLIMITED, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
FOR
THE YEARS ENDED MARCH 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
($ |
1,219,225 |
) |
|
($ |
8,899,132 |
) |
|
Adjustments
to reconcile net loss to net
|
|
|
|
|
|
|
|
|
|
cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
62,346 |
|
|
|
38,218 |
|
|
Impairment
of intangibles
|
|
|
29,510 |
|
|
|
|
|
|
Bad
debt expense
|
|
|
4,251 |
|
|
|
2,414 |
|
|
Interest
income
|
|
|
(2,342 |
) |
|
|
- |
|
|
Net
change in fair market value on investment in ITI
|
|
|
715,000 |
|
|
|
10,660,000 |
|
|
Deferred
tax benefit
|
|
|
- |
|
|
|
(2,425,188 |
) |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
51,921 |
|
|
|
201,210 |
|
|
Accounts
receivable
|
|
|
(10,601 |
) |
|
|
(6,278 |
) |
|
Prepaid
expenses
|
|
|
(19,261 |
) |
|
|
41,844 |
|
|
Due
from affiliate
|
|
|
6,977 |
|
|
|
(6,977 |
) |
|
Deposits
|
|
|
2,654 |
|
|
|
|
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
25,322 |
|
|
|
(151,188 |
) |
|
Customer
deposit - ITI
|
|
|
(7,295 |
) |
|
|
(140,803 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(360,743 |
) |
|
|
(685,880 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Advances
to related party
|
|
|
(286 |
) |
|
|
- |
|
|
Collections
of advances to related parties
|
|
|
- |
|
|
|
26,300 |
|
|
Payment
and services rendered for secured convertible
note
|
|
|
(50,000 |
) |
|
|
- |
|
|
Payment
for asset acquisition
|
|
|
(38,520 |
) |
|
|
(212,491 |
) |
|
Deposit
- restricted cash
|
|
|
(2,262 |
) |
|
|
(226,580 |
) |
|
Purchases
of property and equipment
|
|
|
- |
|
|
|
(14,888 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by investing activities
|
|
|
(91,068 |
) |
|
|
(427,659 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from note payable - Bank
|
|
|
- |
|
|
|
200,000 |
|
|
Repayments
on note payable - Bank
|
|
|
(13,000 |
) |
|
|
(3,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by financing activities
|
|
|
(13,000 |
) |
|
|
197,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash
|
|
|
(464,811 |
) |
|
|
(916,539 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
1,155,786 |
|
|
|
2,072,325 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$ |
690,975 |
|
|
$ |
1,155,786 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
6,185 |
|
|
|
- |
|
|
Income
taxes
|
|
$ |
14,849 |
|
|
$ |
1,810 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash disclosure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company financed insurance premiums during the period.
|
|
|
|
|
|
|
|
|
|
Increase
in prepaid insurance and accounts payable
|
|
$ |
16,775 |
|
|
$ |
18,475 |
|
|
|
|
|
|
|
|
|
|
|
|
Transfer
of inventory to Ivivi, decrease in inventory
|
|
|
|
|
|
|
|
|
|
and
customer deposits - ITI
|
|
$ |
93,730 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
See
Note 2 for a summary of non-cash investing activities.
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these
unaudited
|
|
condensed
consolidated financial
statements.
|
ADM
TRONICS UNLIMITED, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2010 AND 2009
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.
NATURE OF
BUSINESS
We are a
manufacturing and engineering concern whose principal lines of business are the
production and sale of chemical products and the manufacture and sale of
electronics. On August 27, 2008, we acquired all of the assets of
Action Spas, a manufacturer of electronic controllers for spas and hot tubs,
under our fully owned subsidiary Action Industries Unlimited, LLC
(“Action”). With this acquisition, our previous Medical segment was
redefined as our Electronics segment, and the ongoing operations of Action are
now reported under this segment. On July 17, 2009, we purchased the assets of
Antistatic Industries of Delaware, Inc., a company involved in the research,
development and manufacture of water-based and proprietary electrically
conductive paints, coatings and other products and accessories which can be used
by electronics, computer, pharmaceutical and chemical companies to prevent,
reduce or eliminate static electricity.
Our
chemical product line is principally comprised of water-based chemical products
used in the food packaging and converting industries, and anti-static conductive
paints, coatings and other products. These products are sold to customers
located in the United States, Australia, Asia and Europe. Electronics equipment
is manufactured in accordance with customer specifications on a contract basis.
Our electronic device product line consists principally of proprietary devices
used in the treatment of joint pain in humans and animals, tinnitus and
electronic controllers for spas and hot tubs. These products are sold to
customers located principally in the United States.
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 condensed
consolidated 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, liabilities, revenues and expenses, and related disclosures
of contingent assets and liabilities. Significant estimates made by
management include expected economic life and value of our medical devices,
reserves, deferred tax assets, valuation allowance, impairment of long lived
asset, fair value of equity instruments issued to consultants for services and
fair value of equity instruments issued to others, option and warrant expenses
related to compensation to employees and directors, consultants and investment
banks, allowance for doubtful accounts, and warranty reserves. Actual results
could differ from those estimates.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
On April
1, 2008, the Company adopted the accounting pronouncements with respect to fair
value measurements. Please refer to Note 7 for additional
details. For certain of our financial instruments, including accounts
receivable, inventories, secured convertible note, accounts payable, accrued
expenses, and notes payable – other, the carrying amounts approximate
fair value due to their relatively short maturities.
CASH AND
EQUIVALENTS
Cash
equivalents are comprised of certain highly liquid investments with maturities
of three months or less when purchased. We maintain our cash in bank deposit
accounts, which at times, may exceed federally insured limits. We have not
experienced any losses to date as a result of this policy.
ACCOUNTS
RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts
receivable represent uncollateralized customer obligations due under normal
trade terms generally requiring payment within 30 days from the invoice date.
Follow-up calls and correspondence is made if unpaid accounts receivable go
beyond the invoice due date. Payments of accounts receivable are allocated to
the specific invoices identified on the customer’s remittance
advice.
Accounts
receivable are stated at the amount management expects to collect from
outstanding balances. The carrying amounts of accounts receivable is reduced by
a valuation allowance that reflects management’s best estimate of the amounts
that will not be collected. Management individually reviews all accounts
receivable balances that exceed the due date and estimates the portion, if any,
of the balance that will not be collected. Management provides for probable
uncollectible amounts through a charge to expenses and a credit to a valuation
allowance, based on its assessment of the current status of individual accounts.
Balances that are still outstanding after management has used reasonable
collection efforts are written off through a charge to the valuation allowance
and a credit to accounts receivable.
REVENUE
RECOGNITION
CHEMICAL
PRODUCTS:
Revenues
are recognized when products are shipped to end users. Shipments to distributors
are recognized as sales where no right of return exists.
ELECTRONICS:
We
recognize revenue from the sale of our electronic products when they are shipped
to the purchaser. Revenue from the sale of the electronics we
manufactured for Montvale Technologies, Inc. (formerly known as Ivivi
Technologies, Inc.) (“ITI”), through February 12, 2010, and manufactured for
Ivivi Health Sciences, LLC (“IHS”), subsequent to February 12, 2010, is
recognized upon completion of the manufacturing process and shipment of product.
Shipping and handling charges and costs have been de minimis. We offer a limited
90 day warranty on our electronics products and a limited 5 year warranty on our
electronic controllers for spas and hot tubs. We have no other post
shipment obligations and sales returns have been de minimis. Based on prior
experience, no amounts have been accrued for potential warranty costs and such
costs were nominal,less than $500, for the fiscal years ended March 31, 2010 and
March 31, 2009.
WARRANTY
LIABILITIES
We offer
a limited 90 day warranty on our electronics products and a 5 year limited
warranty on all of our electronic controllers for spas and hot tubs sold through
Action. This product lines’ past experience has resulted in
immaterial costs associated with warranty issues. Therefore, no
warranty liabilities have yet been recorded. We consider the amount
of warranty revenue, included in the sales of our electronic products, to be
immaterial based upon our historical experience.
RESTRICTED
CASH
Restricted
cash represents funds on deposit with a financial institution that secure the
bank note payable, discussed in “Note 17 – Note Payable, Bank”.
INVENTORY
Inventories
are stated at the lower of cost (first-in, first-out method) or market.
Inventory that is expected to be sold within one operating cycle (1 year) is
classified as a current asset. Inventory that is not expected to be sold within
1 year, based on historical trends, is classified as Inventory - long
term.
PROPERTY
& EQUIPMENT
We record
our equipment at historical cost. We expense maintenance and repairs as
incurred. Depreciation is provided for by the straight-line method over five to
seven years, the estimated useful lives of the property and
equipment.
LONG-LIVED
ASSETS
We follow
the accounting pronouncement with respect to accounting for impairment of
disposal of long-lived assets, which established a “primary asset” approach to
determine the cash flow estimation period for a group of assets and liabilities
that represents the unit of accounting for a long lived asset to be held and
used. Long-lived assets to be held and used are reviewed at least annually for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The carrying amount of a
long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value less cost to sell. During the year ended March 31, 2010 an
impairment loss in the amount of $29,510 was recognized and in 2009, no
impairment loss was recognized. Management decided in fiscal year 2010 to write
off customer list intangibles due to impairment loss related to their subsidiary
Action Industries Unlimited, LLC.
ADVERTISING
COSTS
Advertising
costs are expensed as incurred and amounted to approximately $16,934 and $24,000
for the years ended March 31, 2010 and 2009, respectively.
STOCK
OPTIONS AND WARRANTS
In April
2006, we adopted the accounting pronouncement with respect to the fair value
recognition of stock based compensation, to account for compensation costs under
our stock option plans and those of our subsidiary.
INCOME
TAXES
We report
the results of our operations as part of a consolidated tax return with our
subsidiaries. We have entered into a tax sharing arrangement where each of the
members compensates each other to the extent that their respective taxes are
affected as a result of this arrangement. Deferred income taxes result primarily
from temporary differences between financial and tax reporting. Deferred tax
assets and liabilities are determined based on the difference between the
financial statement bases and tax bases of assets and liabilities using enacted
tax rates. A valuation allowance is recorded to reduce a deferred tax asset to
that portion that is expected to more likely than not be realized.
On April
1, 2007, the Company adopted the accounting pronouncement with respect to
accounting for uncertainty in income taxes, which clarified the accounting and
disclosures for uncertain tax positions related to income taxes recognized in
the financial statements and addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the
financial statements. The Company recognizes the financial statement
benefit of a tax position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized in
the consolidated financial statements is the largest benefit that has a greater
than 50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority. At the adoption date and at March 31, 2010, the Company
applied this pronouncement to all tax positions for which the statute of
limitations remained open, and determined there was no material impact on the
consolidated financial statements.
The
Company files income tax returns in several jurisdictions. The Company’s tax
returns remain subject to examination, by major jurisdiction, for the years
ended March 31, as follows:
Jurisdiction Fiscal
Year
| Federal |
2006 and
beyond |
| New
Jersey |
2005 and
beyond |
There are
currently no tax years under examination by any major tax
jurisdictions.
In
connection with the adoption of the guidance, the Company will recognize
interest and penalties accrued on any unrecognized tax benefits as a component
of income tax expense. As of March 31, 2010, the Company has no
accrued interest or penalties related to uncertain tax positions.
NET LOSS
PER SHARE
We
compute basic loss per share by dividing net loss 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 anti-dilutive.
Per share basic and
diluted net loss amounted to $0.02 and $0.16 for the year ended March 31, 2010
and March 31, 2009, respectively. The assumed exercise of common
stock equivalents was not utilized in the computation for years ended March 31,
2010 and 2009, since the effect would be anti-dilutive. There were
2,750,000 and 11,626,854 common stock equivalents at March 31, 2010 and 2009,
respectively.
|
NON-CASH
INVESTING ACTIVITY
|
|
Non-cash
investing activity is excluded from the consolidated statement of cash
flows. For the year ended March 31, 2010, non-cash activites
included the following:
|
|
|
|
|
|
|
Asset
Acquisition of Antistatic Industries of Delaware, Inc.:
|
|
|
|
|
Fair
Value of assets acquired
|
|
$ |
66,920 |
|
|
|
|
|
|
|
|
Cash
paid to Seller
|
|
$ |
(26,920 |
) |
|
Cash
paid to Seller under Note Payable
|
|
|
(11,600 |
) |
|
Note
payable outstanding at March 31, 2010
|
|
|
(28,400 |
) |
|
|
|
$ |
(66,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended March 31, 2010 Asset Acquisitions
|
|
|
|
|
|
Details
of Acquisition
|
|
|
|
|
|
Fair
Value of assets acquired
|
|
$ |
66,920 |
|
|
Note
Payable balance at March 31, 2010
|
|
|
(28,400 |
) |
|
Total
cash paid for acquisition
|
|
$ |
38,520 |
|
RECENT
ACCOUNTING PRONOUNCEMENTS
In June
2009, the Financial Accounting Standards Board (“FASB”) issued the FASB
Accounting Standards Codification (“Codification”) as the single source of
authoritative non-governmental U.S. GAAP which was launched on July 1,
2009. The Codification is a new structure which takes accounting pronouncements
and organizes them by approximately ninety accounting topics. The Codification
is now the single source of authoritative U.S. GAAP. All guidance included in
the Codification is now considered authoritative, even guidance that comes from
what is currently deemed to be a non-authoritative section of a standard. Upon
the Codification’s effective date, all non-grandfathered, non-SEC accounting
literature not included in the Codification has become non-authoritative. The
Codification’s effective date for interim and annual periods was
September 15, 2009. The Codification is for disclosure only and has not
impacted the Company’s financial condition or results of operations. The Company
has adopted the Codification, and reflects such adoption throughout this
filing.
Management
does not believe that any other recently issued, but not yet effective
accounting pronouncement, if adopted, would have a material effect on the
accompanying unaudited condensed consolidated financial statements.
|
NOTE
3 - INVENTORY
|
|
|
|
Inventory
as of March 31, 2010 and 2009, consists of the
following:
|
|
March
31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Long
Term
|
|
|
Total
|
|
|
Raw
materials
|
|
$
|
134,544
|
|
|
$
|
23,113
|
|
|
$
|
157,657
|
|
|
Finished
goods
|
|
|
44,085
|
|
|
|
10,689
|
|
|
|
54,774
|
|
|
|
|
$
|
178,629
|
|
|
$
|
33,802
|
|
|
$
|
212,431
|
|
|
March
31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Long
Term
|
|
|
Total
|
|
|
Raw
materials
|
|
$
|
232,851
|
|
|
$
|
33,109
|
|
|
$
|
265,960
|
|
|
Finished
goods
|
|
|
69,959
|
|
|
|
10,689
|
|
|
|
80,648
|
|
|
|
|
$
|
302,810
|
|
|
$
|
43,798
|
|
|
$
|
346,608
|
|
Inventory
at April 1, 2008 was $547,819.
NOTE 4 -
INVESTMENT IN IVIVI AND RELATED CAPITAL TRANSACTIONS
Our
former majority owned subsidiary, ITI 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 ITI’s initial public offering, we no longer owned a majority of
the outstanding common stock of ITI. Since October 18, 2006, we could
exert significant influence based upon the percentage of ITI’s stock we
owned. As a result, our investment in ITI was reported during the
period from October 18, 2006 until March 31, 2008 under the equity method of
accounting, whereby we recognized our share of ITI’s earnings or losses as they
are incurred. Effective April 1, 2008 (“the Adoption Date”), we have
adopted the accounting pronouncement with respect to the fair value of financial
assets and liabilities for our investment in ITI. Management’s reason
for electing the fair value option for its investment in ITI is to increase the
efficiency of our financial reporting responsibilities. The fair
value of our investment in ITI at the adoption date was approximately
$11,375,000. The adoption of the pronouncement, with respect to our
investment in ITI, resulted in the recognition of the following:
|
Pre-tax
cumulative-effect adjustment to retained earnings:
|
|
$
|
9,220,483
|
|
|
Deferred
tax liability:
|
|
|
2,425,188
|
|
| |
|
|
|
|
|
Post-tax
cumulative-effect adjustment to retained earnings:
|
|
$
|
6,795,295
|
|
The fair
value of our investment in ITI as of March 31, 2010 and 2009 was $0 and
$715,000, respectively. In August 2009, ITI notified through filings with the
SEC, it would most likely not be able to continue its operations. On February
12, 2010, ITI sold substantially all of its assets to IHS, and in an additional
filing with the SEC, it indicated that proceeds from such sale would not be
sufficient to pay all of its liabilities. ITI also publicly stated that it
intended to liquidate and anticipated there would not be a distribution to its
shareholders. In August 2009, we wrote down our investment in ITI to
$0.
NOTE 5 –
NOTE RECEIVABLE
On June
4, 2009 the Company invested in Wellington Scientific, LLC (“Wellington”) which
has rights to an electronic uroflowmetry diagnostic medical device
technology. These products are currently distributed in South Africa,
but are not compliant with US FDA requirements for distribution in the US. The
Company intends to modify the design of these products for compliance with FDA
standards and create the required documentation for distribution of these
products in the US. The Company invested a total of $50,000, with $10,000
provided in cash, and $40,000 in services to Wellington. Wellington
issued a convertible note to the Company for a principal amount of $50,000 with
an interest rate of 10% due at various dates through April 2011. The
Company shall be the exclusive manufacturer of these products for Wellington and
shall receive a percentage of future sales, if any.
|
NOTE
6 -
|
INTANGIBLE
ASSETS
|
| |
Intangible
assets are being amortized using the straight line method over periods
ranging from 3-15 years with a weighted average remaining life of
approximately 6.8 years.
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
|
|
Cost
|
|
|
Accumulated Amortization
|
|
|
Net Carrying Amount
|
|
|
Cost
|
|
|
Accumulated Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Patents
& Trademarks
|
|
$ |
71,768 |
|
|
$ |
(58,026 |
) |
|
$ |
13,742 |
|
|
$ |
61,768 |
|
|
$ |
(56,142 |
) |
|
$ |
5,626 |
|
|
Formulas
|
|
|
25,446 |
|
|
|
(1,201 |
) |
|
|
24,245 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Non-Compete
Agreement
|
|
|
50,000 |
|
|
|
(11,310 |
) |
|
|
38,690 |
|
|
|
50,000 |
|
|
|
(4,167 |
) |
|
|
45,833 |
|
|
Controller
Design
|
|
|
100,000 |
|
|
|
(22,619 |
) |
|
|
77,381 |
|
|
|
100,000 |
|
|
|
(8,333 |
) |
|
|
91,667 |
|
|
Customer
List
|
|
|
10,000 |
|
|
|
(2,361 |
) |
|
|
7,639 |
|
|
|
62,491 |
|
|
|
(11,414 |
) |
|
|
51,077 |
|
|
|
|
$ |
257,214 |
|
|
$ |
(95,517 |
) |
|
$ |
161,697 |
|
|
$ |
274,259 |
|
|
$ |
(80,056 |
) |
|
$ |
194,203 |
|
|
Amortization
expense was $48,443 and $28,010 for the twelve months ended March 31, 2010
and 2009, respectively. Estimated aggregate future amortization expense
related to intangible assets is as
follows:
|
|
2011
|
|
|
28,431 |
|
|
2012
|
|
|
28,154 |
|
|
2013
|
|
|
25,451 |
|
|
2014
|
|
|
24,385 |
|
|
2015
|
|
|
24,335 |
|
|
Thereafter
|
|
|
30,941 |
|
|
|
|
$ |
161,697 |
|
|
Management
has reviewed intangibles as part of their annual review and has decided to
write off customer list intangibles due to impairment loss related to
their subsidiary Action Industries Unlimited, LLC. The carrying amount of
the intangible exceeds the sum of the future undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The
net book value of $29,510 was written off for customer lists in March
2010. Management
does not believe that the remaining intangibles are
impaired.
|
NOTE
7 – FAIR VALUE MEASUREMENTS
Effective
April 1, 2008, the Company adopted the accounting pronouncement with
respect to fair value of financial assets and liabilities, as well as for any
other assets and liabilities that are carried at fair value on a recurring
basis. The adoption of the provisions related to financial assets and
liabilities and other assets and liabilities that are carried at fair value on a
recurring basis did not materially impact the Company’s consolidated financial
position and results of operations.
The
pronouncement defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. The pronouncement also
establishes a fair value hierarchy, which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The pronouncement describes three levels of inputs that may be used
to measure fair value:
|
Level
1
|
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities.
|
|
|
|
|
|
Level
2
|
|
Quoted
prices in markets that are not active; or other inputs that are
observable, either directly or indirectly, for substantially the full term
of the asset or liability.
|
|
|
|
|
|
Level
3
|
|
Prices
or valuation techniques that require inputs that are both significant to
the fair value measurement and
unobservable.
|
On March
31, 2008 the fair value of our investment in ITI was $2,154,517. As of March 31,
2009 the ITI share price had deteriorated and we recorded a decrease in fair
value to $715,000.
The
following table presents assets measured at fair value on a recurring basis at
March 31, 2009:
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Investment in
ITI |
|
$ |
715,000 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
715,000 |
|
During
the quarter ended June 30, 2009, management had determined the investment in ITI
should be valued using both Level 1 and Level 2 inputs.
In August
2009, ITI notified through filings with the SEC, it would most likely not be
able to continue its operations. On February 12, 2010, ITI sold substantially
all of its assets to IHS, and in an additional filing with the SEC, it indicated
that proceeds from such sale would not be sufficient to pay all of its
liabilities. ITI also publicly stated that it intended to liquidate and
anticipated there would not be a distribution to its shareholders. In
August 2009, the
Company recorded a decrease in fair value of $715,000 writing down the
investment in ITI to $0.
The
following table presents assets measured at fair value on a recurring basis at
March 31, 2010:
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Investment in
ITI |
|
$ |
715,000 |
|
|
$ |
(715,000 |
) |
|
$ |
-- |
|
|
$ |
-- |
|
NOTE 8 -
CONCENTRATIONS
During
the year ended March 31, 2010, three customers accounted for 50% of our revenue.
As of March 31, 2010 two customers accounted for 65% of our accounts
receivable.
During
the year ended March 31, 2009, two customers accounted for 54% of our revenue.
As of March 31, 2009, two customers accounted for 67% of our accounts
receivable.
NOTE 9 -
SEGMENT INFORMATION
Information
about segments is as follows:
|
|
|
Chemical
|
|
|
Electronics
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
Revenues
from external customers
|
|
$
|
890,355
|
|
|
$
|
276,236
|
|
|
$
|
1,166,591
|
|
|
Segment
loss (operating loss)
|
|
|
(61,679
|
)
|
|
|
(449,226
|
)
|
|
|
(510,905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
from external customers
|
|
$
|
768,491
|
|
|
$
|
717,792
|
|
|
$
|
1,486,283
|
|
|
Segment
loss (operating loss)
|
|
|
(256,270
|
)
|
|
|
(451,217
|
)
|
|
|
(707,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at March 31, 2010
|
|
$
|
1,012,324
|
|
|
$
|
591,804
|
|
|
$
|
1,604,128
|
|
NOTE 10 -
PROPERTY AND EQUIPMENT
Our
property and equipment as of March 31, 2010 and 2009 is as follows:
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Computer
equipment
|
|
$
|
13,364
|
|
|
$
|
13,366
|
|
|
Machinery
and equipment
|
|
|
80,934
|
|
|
|
70,934
|
|
|
Leasehold
improvements
|
|
|
3,750
|
|
|
|
3,750
|
|
|
|
|
|
98,048
|
|
|
|
88,050
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(41,983
|
)
|
|
|
(28,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
$
|
56,065
|
|
|
$
|
59,968
|
|
Depreciation
expense related to property and equipment amounted to $13,901 and $10,209 during
the years ended March 31, 2010 and 2009, respectively.
NOTE 11 -
INCOME TAXES
At March
31, 2010, the Company had federal and state net operating loss carryforwards, or
“NOLs,” of approximately $6.4 million, which are due to expire through
fiscal 2030. These NOLs may be used to offset future taxable income through
their respective expiration dates and thereby reduce or eliminate our federal
and state income taxes otherwise payable. A valuation allowance is provided when
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Ultimate utilization/availability of such net operating
losses and credits is dependent upon the Company’s ability to generate taxable
income in future periods and may be significantly curtailed if a significant
change in ownership occurs in accordance with the provisions of the Tax Reform
Act of 1986.
Due to
the uncertainty related to, among other things, the extent and timing of its
future taxable income, the Company offset the deferred tax assets related to bad
debts, depreciation and amortization and NOL’s by an equivalent valuation
allowance at March 31, 2010.
Significant
components of deferred tax assets and liabilities are as follows:
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets (liabilities):
|
|
|
|
|
|
|
|
Net
operating loss carry forward
|
|
$ |
2,571,000
|
|
|
$ |
2,369,000
|
|
|
Unrealized
gain on Investment in ITI
|
|
|
-
|
|
|
|
(286,000
|
)
|
|
Bad
debts
|
|
|
2,000
|
|
|
|
1,000
|
|
|
Depreciation
and Amortization
|
|
|
1,000
|
|
|
|
1,000
|
|
|
Deferred
tax assets
|
|
|
2,574,000
|
|
|
|
2,085,000
|
|
|
Valuation
allowance
|
|
|
(2,574,000
|
)
|
|
|
(2,085,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
$ |
-
|
|
|
$ |
-
|
|
The
provision for income taxes at March 31, 2010 and 2009 differs from that amount
using the statutory federal income tax rate as follows:
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Statutory
federal income tax rate
|
|
|
(34
|
)%
|
|
|
(34
|
)%
|
|
State
income taxes, net of federal taxes
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
Nondeductible
items
|
|
|
|
|
|
|
40
|
|
|
Valuation
allowance
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
income tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
NOTE 12 -
OPTIONS AND WARRANTS OUTSTANDING
No
options were granted during the years ended March 31, 2010 and
2009. During the year ended March 31, 2007, ADM granted an aggregate
of 3,500,000 stock options to employees and consultants. The options have an
exercise price of $0.29, were fully vested at the date of grant. On
August 30, 2009, 750,000 of such options expired and the balance are exercisable
until August 30, 2011. The options were valued at $351,529 using the Black
Scholes option pricing model with the following assumptions: risk free interest
rate of 4.9%, volatility of 85%, estimated life of 1.5 years and dividend rate
of 0%. The options have a remaining life of 1.4 years at March 31,
2010.
NOTE 13 -
COMMITMENTS AND CONTINGENCIES
We lease
our office and manufacturing facility under a non-cancelable operating lease,
which expires on June 30, 2018. The company’s future minimum lease commitment at
March 31, 2010 is $837,969.
|
|
|
|
|
|
Period
|
|
Per
year
|
|
|
2011
|
|
$ |
96,875 |
|
|
2012
|
|
$ |
96,875 |
|
|
2013
|
|
$ |
96,875 |
|
|
2014
|
|
$ |
102,688 |
|
|
2015
|
|
$ |
104,625 |
|
|
Thereafter
|
|
$ |
340,031 |
|
|
|
|
$ |
837,969 |
|
|
|
|
|
|
|
Rent and
real estate tax expense for all facilities for the years ended March 31, 2010
and 2009 was approximately $94,000 and $86,000, respectively.
NOTE 14 -
LEGAL PROCEEDINGS
We are
involved, from time to time, in litigation and proceedings arising out of the
ordinary course of business. There are no pending material legal proceedings or
environmental investigations to which we are a party or to which our property is
subject.
NOTE 15 -
RELATED PARTY TRANSACTIONS
ADVANCES
TO RELATED PARTIES
As of
March 31, 2010, ADM was owed $9,552 from advances made to an officer. No
advances have been made since 2000. The advances bear interest at the rate of 3%
per year. Interest accrued for the years ended March 31, 2010 and 2009 was $286
and $652 respectively. Total accrued interest at March 31, 2010 was
$38,733.
MANAGEMENT
SERVICES AGREEMENT
In August
2001, ADM entered into a management services agreement, as amended, with ITI and
ADM allocated portions of its real property facilities for use by ITI for the
conduct of its business. ADM and ITI used office, manufacturing and storage
space in a building located in Northvale, New Jersey, currently leased by ADM.
Pursuant to the terms of the management services agreement, ADM determined the
portion of space allocated to ITI on a monthly basis, and ITI reimbursed ADM
monthly for its portion of the lease costs, real property taxes and related
costs plus any invoices it receives from third parties specific to
ITI.
During
the year ended March 31, 2010 ITI had approximately $17,000 in management
services provided to it by ADM pursuant to the management services
agreement. ITI had approximately $69,000 in management services
provided to it by ADM pursuant to the management services agreement during the
year ended March 31, 2009.
On August
1, 2009, we entered into an agreement with ITI to provide services described
below and canceled our management services agreement described
above. Under the agreement:
|
●
|
we
provided ITI with engineering services, including quality control and
quality assurance services along with regulatory compliance services
warehouse fulfillment services and network administration services
including hardware and software
services;
|
|
●
|
we
were paid at the rate of $26,000 per month by ITI for these services; and
ITI agreed to terminate the four full time engineers and three part time
engineers then employed by ITI.
|
On
February 12, 2010 concurrent with the acquisition of ITI’s assets by IHS, we
agreed to provide the above services to IHS and IHS agreed to pay us $26,000 per
month for such services pursuant to a Master Services Agreement. In June 2010,
it was agreed that IHS would pay $11,000 for June 2010 and $5,000 per month
thereafter for reduced services performed by ADM.
MANUFACTURING
AGREEMENT
ADM and
ITI are parties to a manufacturing agreement, dated as of August 15, 2001, and
as amended in February, 2005. The manufacturing agreement was subsequently
assigned to IHS on February 12, 2010. Under the terms of the agreement, ADM has
agreed to serve as the exclusive manufacturer of all current and future medical
and nonmedical electronic and other electronic devices or products to be sold or
rented by ITI. For each product that ADM manufactures, ITI pays ADM an amount
equal to 120% of the sum of (i) the actual, invoiced cost for raw materials,
parts, components or other physical items that are used in the manufacture of
the product and actually purchased for such entity by ADM, if any, plus (ii) a
labor charge based on ADM’s standard hourly manufacturing labor rate, which ADM
believes is more favorable than could be attained from unaffiliated third
parties. Under the terms of the agreement, if ADM is unable to perform its
obligations to ITI under the manufacturing agreement or is otherwise in breach
of any provision of the manufacturing agreement, ITI has the right, without
penalty, to engage third parties to manufacture some or all of its products. In
addition, if ITI elects to utilize a third-party manufacturer to supplement the
manufacturing being completed by ADM, ITI has the right to require ADM to accept
delivery of its products from these third-party manufacturers, finalize the
manufacture of the products to the extent necessary and ensure that the design,
testing, control, documentation and other quality assurance procedures during
all aspects of the manufacturing process have been met.
As
reported in its filings with the SEC, on February 12, 2010, ITI sold
substantially all of its assets pursuant to the terms of an asset purchase
agreement and ITI expects to be dissolved as soon as practicable thereafter. As
a result, our future fiscal periods will not include material purchase orders
from ITI, and may not include material purchase orders from the purchaser of its
assets. As a result of ITI’s asset sale and expected dissolution, we will be
required to seek new customers in order to replace such revenue.
Pursuant
to the manufacturing agreement, sales of finished goods to ITI during the year
ended March 31, 2010 were approximately $62,000. Sales and manufacturing charges
for the year ended March 31, 2009 were approximately $547,000. After the assets
were purchased from ITI to IHS on February 12, 2010, sales to IHS were
approximately $12,000.
|
Activity
with ITI can be summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning of period
|
|
$ |
(104,320 |
) |
|
$ |
(241,828 |
) |
|
|
|
|
|
|
|
|
|
|
|
Advances
from ITI
|
|
|
(4,069 |
) |
|
|
(159,448 |
) |
|
Transfer
of inventory to ITI
|
|
|
93,730 |
|
|
|
- |
|
|
ITI
purchases from ADM
|
|
|
62,307 |
|
|
|
546,874 |
|
|
Charges
from ITI
|
|
|
(7,214 |
) |
|
|
(9,617 |
) |
|
Charges
to ITI
|
|
|
172,760 |
|
|
|
68,934 |
|
|
Payments
from ITI
|
|
|
(223,704 |
) |
|
|
(315,556 |
) |
|
Payments
to ITI
|
|
|
10,510 |
|
|
|
6,321 |
|
|
|
|
|
|
|
|
|
|
|
|
Due
(to) ITI, end of period
|
|
$ |
(0 |
) |
|
$ |
(104,320 |
) |
At March
31, 2010 and 2009 ADM had a receivable balance of $0 and $6,977, respectively,
from ITI.
NOTE 16 –
NOTE PAYABLE – OTHER
On July
17, 2009 we purchased the assets of Antistatic Industries of Delaware, Inc. a
company involved in the research, development and manufacture of water-based and
proprietary electrically conductive paints, coatings and other products and
accessories. The purchase price for the assets was $66,920 of
which $38,520 was paid during the fiscal year ending March 31, 2010 and the
balance of $28,400 is a note payable, bearing imputed interest rate of 3.5% per
annum, which will be repaid over the next 17 months.
The fair
value assigned to the acquired assets was as follows:
|
Inventory
|
|
$ |
11,474 |
|
|
Equipment
|
|
|
10,000 |
|
|
Patents
and trademarks
|
|
|
10,000 |
|
|
Formulas
|
|
|
25,446 |
|
|
Customer
list
|
|
|
10,000 |
|
|
Total
|
|
$ |
66,920 |
|
NOTE 17 –
NOTE PAYABLE, BANK
On August
21, 2008, the Company entered into a note payable with a commercial bank in the
amount of $200,000. This note bears interest at a rate of 2.98% and
is secured by cash on deposit with the institution, which is classified as
restricted cash. Amounts outstanding under the note are payable on
demand, and interest is payable monthly. The principal balance of the
note at March 31, 2010 was $184,000.
NOTE 18 -
SUBSEQUENT EVENTS
Subsequent
Events have been evaluated through June 29, 2010, the date the financial
statements were filed with the Securities and Exchange Commission
(“SEC”).
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A.
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 annual Report on Form 10-K, 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 March 31, 2010, our principal executive
officer and principal financial officer concluded that our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) are effective.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our
management is responsible for establishing and maintaining effective internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) over our company. Internal control over financial
reporting is a process to provide reasonable assurance regarding the reliability
of our financial reporting for external purposes in accordance with accounting
principles generally accepted in the United States. Because of its inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements would
be prevented or detected.
Management,
including our Chief Executive Officer and Chief Financial Officer, has evaluated
our internal control over financial reporting as of March 31, 2010, based on the
framework in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations (COSO) of the Treadway Commission. Based on its
assessment, management has concluded that our internal control over financial
reporting was effective as of March 31, 2010.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual
report.
INTERNAL
CONTROL 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 of the fiscal year to which
this report relates that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
ITEM 9B.
OTHER INFORMATION
None
PART
III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The
following table sets forth the names, positions and ages of the Company’s
executive officers and directors. All of the Company’s directors serve until the
next annual meeting of stockholders or until their successors are elected and
qualify. Officers are elected by the board of directors and their terms of
offices are, except to the extent governed by employment contracts, at the
discretion of the board of directors.
|
Name
|
Age
|
Position
|
|
|
|
|
|
Andre’
DiMino
|
54
|
President,
Chief Executive Officer,
|
|
|
|
Chief
Financial Officer and Director
|
|
|
|
|
|
Vincent
DiMino
|
84
|
Director
|
Andre’
DiMino has served as President of the Company since December 2001 and a director
and Chief Financial Officer of the Company since 1987. Prior thereto, Mr. DiMino
served as Executive Vice President and Chief Operating Officer since 1991 and
Secretary and Treasurer of the Company since 1978. Mr. DiMino also served as the
Technical Director of ADM Tronics from 1982 to 1991. Mr. DiMino served as Vice
Chairman, Executive Vice President and Chief Technology officer of ITI from
August 2008 to February 2010. He also served as Vice Chairman and
Co-Chief Executive Officer of ITI from October 2006 to August 2008, and as
Chairman and Chief Financial Officer from January 2004 until October 2006 and
served as President of ITI from 1989 to January 2004. Since February
12, 2010 Mr. DiMino has served as Vice President-Engineering, Manufacturing and
Regulatory for IHS.
Vincent
DiMino served as Vice President of Production of the Company from 1969 to 2008
and as a director of the Company since August 1987.
Vincent
DiMino is Andre’ DiMino’s uncle. There is no other family relationship between
any of the Company’s directors or executive officers.
AUDIT
COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
Because
of the Company’s ongoing efforts to engage qualified board members, the Company
does not have a separately designated audit committee or compensation committee
at this time. Accordingly, the Company’s Board of Directors also has determined
that the Company does not have an audit committee financial expert. The Company
continues to seek new board members in order to appoint a separately designated
audit committee. The functions which would be performed by an audit committee
are performed by the Board of Directors as a whole.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act, and the rules and regulations of the Securities and
Exchange Commission promulgated there under, requires the Company’s directors,
executive officers and persons who own beneficially more than 10% of the
Company’s common stock to file reports of ownership and changes in ownership of
such stock with the Securities and Exchange Commission. Based solely upon a
review of such reports, the Company believes that all of its directors,
executive officers and 10% stockholders complied with all applicable Section
16(a) filing requirements during the Company’s last fiscal year.
CODE OF
ETHICS
The
Company has adopted a code of ethics that applies to its principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of such Code of
Ethics has been filed as Exhibit 14.1 to the Annual Report on Form 10-KSB for
the fiscal year ended March 31, 2005.
ITEM 11.
EXECUTIVE COMPENSATION
The
following table provides certain summary information for the fiscal years ended
March 31, 2010 and 2009 concerning compensation paid, or accrued, by ADM to, or
on behalf of, ADM’s President, Chief Executive Officer and Chief Financial
Officer (the “Named Officer”). Other than ADM’s President and Chief Executive
Officer, the Company does not have any executive officers of the Company whose
total annual salary and bonus exceeded $100,000 during the fiscal year ended
March 31, 2010.
|
Name
& Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
|
Andre
DiMino
|
|
2010
|
|
99,840
|
|
-
|
|
-
|
|
-
|
|
99,840
|
|
|
Chief
Executive
|
|
2009
|
|
|
142,200
|
|
-
|
|
|
-
|
|
-
|
|
|
142,200
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
| |
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
Number
of |
|
|
|
Plan
Awards:
|
|
|
|
|
|
|
|
Securities |
|
Number
of
|
|
Number
of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Unexercised
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
|
|
(#)
|
|
Options
(#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options
(#)
|
|
Price
($)
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andre
DiMino
|
|
1,300,000
|
|
-
|
|
-
|
|
0.29
|
|
8/30/2011
|
DIRECTORS’
COMPENSATION
The
Company does not pay fees to its directors, nor does it reimburse its directors
for expenses incurred.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The
following table sets forth information regarding ownership of shares of
Company’s common stock, as of June 29, 2010, by (i) each person known to ADM to
be the owner of 5% or more of ADM’s common stock (ii) each director and director
nominee of ADM, (iii) the Named Officer, and (iv) all directors and officers of
ADM as a group. Except as otherwise indicated, each person and each group shown
in the table has sole voting and investment power with respect to the shares of
the Company’s common stock indicated. For purposes of the table below, in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, a person is deemed to be the beneficial owner, for purposes of any
shares of Common Stock over which he or she has or shares, directly or
indirectly, voting or investment power; or of which he or she has the right to
acquire beneficial ownership at any time within 60 days after July 10, 2007. As
used herein, “voting power” is the power to vote or direct the voting of shares
and “investment power” includes the power to dispose or direct the disposition
of shares. Common Stock beneficially owned and percentage ownership is based on
53,939,537 shares of Common Stock outstanding as of June 29,
2010.
|
|
|
Number
of Shares
|
|
|
|
|
|
Name
and Address
|
|
Beneficially
Owned
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
Andre’
DiMino
|
|
|
19,880,883
|
(1)
|
|
|
35.8
|
%
|
|
c/o
ADM Tronics Unlimited, Inc.
|
|
|
|
|
|
|
|
|
|
224
Pegasus Ave.
|
|
|
|
|
|
|
|
|
|
Northvale,
NJ 07647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent
DiMino
|
|
|
7,187,928
|
(2)
|
|
|
13.2
|
%
|
|
c/o
ADM Tronics Unlimited, Inc.
|
|
|
|
|
|
|
|
|
|
224
Pegasus Ave.
|
|
|
|
|
|
|
|
|
|
Northvale,
NJ 07647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eugene
Stricker
|
|
|
4,188,700
|
(3)
|
|
|
7.8
|
%
|
|
c/o
Fifth Avenue Venture Capital Partners
|
|
|
|
|
|
|
|
|
|
42
Barrett Road
|
|
|
|
|
|
|
|
|
|
Lawrence,
NY 11559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
as
a group (three persons)
|
|
|
21,968,811
|
(4)
|
|
|
39.2
|
%
|
(1)
Includes 8,991,223 shares of the Company’s common stock directly owned by Andre
DiMino; 1,700,000 shares of the Company’s common stock held by the Andre’ DiMino
Irrevocable Trust, a Trustee and the beneficiary of which is Andre’ DiMino, who
may be deemed to be a beneficial owner of such shares; 1,700,000 shares of the
Company’s common stock held by the Maria Elena DiMino Trust, a Trustee of which
is Andre’ DiMino, who may be deemed to be a beneficial owner of such shares by
reason of his power to vote such shares; 1,700,000 shares of the Company’s
common stock held by the Maurice DiMino Irrevocable Trust, a Trustee of which is
Andre’ DiMino, who may be deemed to be a beneficial owner of such shares by
reason of his power to vote such shares; 1,300,000 shares which may be acquired
by Andre’ Dimino upon the exercise of options; 960 shares owned by Jenny DiMino,
the spouse of Andre’ DiMino; 300,000 shares which may be acquired by Jenny
DiMino upon the exercise of options; and 4,188,700 shares of the Company’s
common stock held by Eugene Stricker, of which Andre’ DiMino may be deemed to be
a beneficial owner by reason of his power to vote such shares pursuant to an
agreement.
(2)
Includes 1,287,928 shares of the Company’s common stock directly owned by Mr.
Vincent DiMino, 300,000 shares of the Company’s common stock owned by the spouse
of Vincent DiMino, as to which Mr. DiMino disclaims beneficial ownership;
500,000 shares which may be acquired by Vincent DiMino upon the exercise of
options; and 5,100,000 shares of the Company’s common stock of which 1,700,000
shares are held by each of the Andre’ DiMino Irrevocable Trust, the Maria Elena
DiMino Irrevocable Trust and the Maurice DiMino Irrevocable Trust, a Trustee of
which is Vincent DiMino, who may be deemed to be a beneficial owner of the
shares held by such trusts by reason of his power to vote such
shares.
(3) Mr.
Andre’ DiMino may be deemed to be a beneficial owner of such shares by reason of
his power to vote such shares pursuant to an agreement. Reference is also made
to Footnote No. 1.
(4)
Reference is made to Footnote Nos. 1 and 2.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time
to time prior to 2000, the Company has loaned funds to Andre’ DiMino at an
interest rate of 3% per annum. The largest aggregate amount of indebtedness,
including interest, outstanding at any time since the beginning of the Company’s
fiscal year ended March 31, 2003 was approximately $89,900 and the amount of
principal and interest outstanding as of March 31, 2010 was approximately
$48,000.
MANAGEMENT
SERVICES AGREEMENT
ADM
entered into individual management services agreements, dated as of August
15, 2001, with ITI, SMI and Pegasus under which the Company provides such
entities with management services and allocates portions of its real property
facilities for use by such entities for the conduct of their respective
businesses. The management services provided by the Company under the management
services agreement include managerial and administrative services, marketing and
sales services, clerical and communication services, the maintenance of a
checking account and the writing of checks, the maintenance of accounting
records and other services in the ordinary course of business. The entities pay
ADM for such services on a monthly basis pursuant to an allocation determined by
ADM and such entities based on a portion of its applicable costs plus any
invoices it receives from third parties specific to each such entity. ADM’s
subsidiaries and ITI also use office, manufacturing and storage space in a
building located in Northvale, New Jersey, currently leased by the Company,
pursuant to the terms of the management services agreement. ADM determines the
portion of space allocated to each entity on a monthly basis, and the
subsidiaries and ITI are required to reimburse the Company for their respective
portions of the lease costs, real property taxes and related costs.
ITI had
approximately $17,000 and $69,000 in management services provided to it by ADM
pursuant to the management services agreement during the fiscal years ended
March 31, 2010 and 2009, respectively.
On August
1, 2009, we entered into an agreement with ITI to provide services described
below and canceled our management services agreement described
above. Under the agreement:
|
●
|
we
provided ITI with engineering services, including quality control and
quality assurance services along with regulatory compliance services
warehouse fulfillment services and network administration services
including hardware and software
services;
|
|
●
|
we
were paid at the rate of $26,000 per month by ITI for these services; and
ITI agreed to terminate the four full time engineers and three part time
engineers then employed by ITI.
|
On
February 12, 2010 concurrent with the acquisition of ITI’s assets by IHS, we
agreed to provide the above services to IHS and IHS agreed to pay us $26,000 per
month for such services pursuant to a Master Services Agreement. In June 2010,
it was agreed that IHS would pay $11,000 for June 2010 and $5,000 per month
thereafter for reduced services performed by ADM.
MANUFACTURING
AGREEMENT
ADM, ITI
and SMI are parties to manufacturing agreements, dated as of August 15, 2001,
and as amended in February, 2005. The manufacturing agreement with ITI was
subsequently assigned to IHS on February 12, 2010. Under the terms of the
agreement, the Company has agreed to serve as the exclusive manufacturer of all
current and future medical and non-medical electronic and other devices or
products to be sold or rented by the entities. For each product that ADM
manufactures for each entity, the entity pays ADM an amount equal to 120% of the
sum of (i) the actual, invoiced cost for raw materials, parts, components or
other physical items that are used in the manufacture of the product and
actually purchased for such entity by the Company, if any, plus (ii) a labor
charge based on the Company’s standard hourly manufacturing labor rate, which
the Company believes is more favorable than could be attained from unaffiliated
third-parties. The Company generally purchases and provides ADM with all of the
raw materials, parts and components necessary to manufacture the entities’
products. Under the terms of the agreement, if the Company is unable to perform
its obligations to either entity under the manufacturing agreement or is
otherwise in breach of any provision of the manufacturing agreement, such entity
has the right, without penalty, to engage third parties to manufacture some or
all of its products. In addition, if the entity elects to utilize a third-party
manufacturer to supplement the manufacturing being completed by ADM, such entity
has the right to require ADM to accept delivery of its products from these
third-party manufacturers, finalize the manufacture of the products to the
extent necessary and ensure that the design, testing, control, documentation and
other quality assurance procedures during all aspects of the manufacturing
process have been met. Reference is made to “Item 1. Description of
Business--Manufacturers and Suppliers.”
As
reported in its filings with the SEC, on February 12, 2010, ITI sold
substantially all of its assets pursuant to the terms of an asset purchase
agreement and ITI expects to be dissolved as soon as practicable thereafter. As
a result, our future fiscal periods will not include material purchase orders
from ITI, and may not include material purchase orders from the purchaser of its
assets. As a result of ITI’s asset sale and expected dissolution, we will be
required to seek new customers in order to replace such revenue.
Pursuant
to the manufacturing agreement, sales of finished goods to ITI during the years
ended March 31, 2010 and 2009 were approximately $68,000 and $547,000,
respectively.
Director
Independence
Our
common stock is not listed on a national securities exchange and therefore, we
are not subject to any corporate governance requirements regarding independence
of board or committee members. However, we have chosen the definition
of independence contained in the rules of The American Stock Exchange, LLC as a
benchmark to evaluate the independence of our directors. Under the
AMEX listing standards, an “independent director” of a company means a person
who is not an officer or employee of the company or its subsidiaries and who the
board of directors has affirmatively determined does not have a relationship
that would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director. Our Board of Directors has
determined that none of our current directors or David Saloff, who served as a
director during our last fiscal year, are independent directors within the
meaning of the applicable AMEX listing standard.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT
FEES
The
aggregate fees billed for professional services rendered by Raich Ende Malter
& Co. LLP (“Raich”) for the audit of the Company’s annual consolidated
financial statements for the fiscal years ended March 31, 2010 and 2009, and for
the reviews of the financial statements included in the Company’s Quarterly
Reports on Form 10-QSB for the fiscal years ended March 31, 2010 and 2009, were
$55,290 and $71,445, respectively.
AUDIT-RELATED
FEES
The
aggregate fees billed in each of the fiscal years ended March 31, 2010 and 2009
for assurance and related services by Raich that are reasonably related to the
performance of the audit or review of the Company’s financial statements and not
reported above under “Audit Fees” were $0 and $1,183, respectively.
TAX
FEES
The
aggregate fees billed in each of the fiscal years ended March 31, 2010 and 2009
for professional services rendered by Raich for tax compliance, tax advice and
tax planning were $12,000 and $12,500, respectively.
ALL OTHER
FEES
The
aggregate fees billed in each of the fiscal years ended March 31, 2010 and March
31, 2009 for products and services provided by Raich other than the services
reported above under “Audit Fees”, “Audit Related Fees” and “Tax Fees” were $0
and $0 respectively.
AUDIT
COMMITTEE ADMINISTRATION OF THE ENGAGEMENT
The
Company does not have an audit committee.
PART III,
ITEM 15. EXHIBITS
|
Exhibit
|
|
|
No.
|
Description
|
|
|
|
|
3.1
|
Certificate
of Incorporation and amendments thereto filed on August 9, 1976 and May
15, 1978 is incorporated by reference to Exhibit 3(a) to the Company’s
Registration Statement Form 10 (File No. 0-17629) (the “Form
10”).
|
|
3.2
|
Certificate
of Amendment to Certificate of Incorporation filed December 9, 1996 is
incorporated by reference to Exhibit 3(a) to the Company’s Annual Report
on Form 10-KSB for the fiscal year ended March 31,
1997.
|
|
3.3
|
By-Laws
are incorporated by reference to Exhibit 3(b) to the Form
10.
|
|
9.1
|
Trust
Agreements of November 7, 1980 by and between Dr. Alfonso DiMino et al.
are incorporated by reference to Exhibit 9 to the Company’s Annual Report
on Form 10-KSB for the fiscal year ended March 31,
1993.
|
|
10.1
|
Memorandum
of Lease by and between the Company and Cresskill Industrial Park III
dated as of August 26, 1993 is hereby incorporated by reference to Exhibit
10(a) to the Company’s Annual Report on Form 10-KSB for the fiscal year
March 31, 1994.
|
|
10.5
|
Agreement
of January 17, 2003 by and between the Company and Fifth Avenue Venture
Capital Partners is hereby incorporated by reference to Exhibit 10.5 to
the Company’s Annual Report on Form 10-KSB for the fiscal year ended March
31, 2003.
|
|
10.6
|
Amended
and Restated Manufacturing Agreement, dated February 10, 2005, among the
Company, Ivivi Technologies, Inc. and Sonotron Medical Systems, Inc. is
incorporated by reference to the Company’s Annual Report on Form 10-KSB
for the fiscal year ended March 31, 2005.
|
|
10.7
|
Management
Services Agreement, dated August 15, 2001, among the Company, Ivivi
Technologies, Inc., Sonotron Medical Systems, Inc. and Pegasus
Laboratories, Inc., as amended is incorporated by reference to the
Company’s Annual Report on Form 10-KSB form the fiscal year ended March
31, 2005.
|
|
10.8
|
Master
Services Agreement dated February 12, 2010 by and between ADM Tronics
Unlimited Inc and Ivivi Health Sciences
LLC.
|
|
14.1
|
Code
of Ethics is incorporated by reference to the Company’s Annual Report on
Form 10-KSB for the fiscal year ended March 31, 2005.
|
|
21.1
|
Subsidiaries
of the Company.
|
|
31.1
|
Certification
of the Chief Executive Officer of the Company pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of the Chief Financial Officer of the Company pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer of the Company
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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 this 30th day of June,
2010.
|
|
|
ADM
TRONICS UNLIMITED, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Andre’ DiMino
|
|
|
|
|
Andre’
Di Mino
|
|
|
|
|
Chief
Executive Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
|
|
|
|
|
|
/s/
|
Andre’
DiMino
|
Chief
Executive Officer (Principal
|
June
29, 2010
|
|
|
Andre’
DiMino
|
Executive
Officer, Principal
|
|
|
|
|
Financial
Officer and Principal
|
|
|
|
|
Accounting
Officer) and Director
|
|
|
|
|
|
|
|
/s/
|
Vincent
DiMino
|
Director
|
June
29, 2010
|
|
|
Vincent
DiMino
|
|
|