ADM TRONICS UNLIMITED, INC. The following discussion of our operations and financial condition should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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-Q 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 our Annual Report on Form
10-K for the year ended
CRITICAL ACCOUNTING POLICIES
REVENUE RECOGNITION ELECTRONICS:
We recognize revenue from the sale of our electronic products when they are shipped to the purchaser. We offer a limited 90-day warranty on our electronics products and contract manufacturing and a limited 5-year warranty on our electronic controllers for spas and hot tubs. Historically, the amount of warranty revenue included in sales of our electronic products have been de minimus. We have no other post shipment obligations.
Amounts received from customers in advance of our satisfaction of applicable
performance obligations are recorded as customer deposits. Such amounts are
recognized as revenues when the related performance obligations are satisfied.
Customer deposits of approximately
CHEMICAL PRODUCTS:
Revenues are recognized when products are shipped to end users. Shipments to distributors are recognized as revenue when no right of return exists.
ENGINEERING SERVICES:
We provide certain engineering services, including research, development, quality control, and quality assurance services along with regulatory compliance services. We recognize revenue from engineering services on a monthly basis over time as the applicable performance obligations are satisfied.
All revenue is recognized net of discounts.
USE OF ESTIMATES
These unaudited condensed consolidated financial statements have been prepared in accordance with US GAAP and, accordingly, requires 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 of our deferred tax assets and related valuation allowance, write down of inventory, impairment of long-lived assets, allowance for doubtful accounts, and warranty reserves. Actual results could differ from those estimates.
LEASES
In
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--------------------------------------------------------------------------------The Company made a policy election to recognize short-term lease payments as an expense on a straight-line basis over the lease term. The Company defines a short-term lease as a lease that, at the commencement date, has a lease term of twelve months or less and does not contain an option to purchase the underlying asset that the lease is reasonably certain to exercise. Related variable lease payments are recognized in the period in which the obligation is incurred.
The Company's lease agreement contains related non-lease components (e.g. taxes, etc.). The Company separates lease components and non-lease components for all underlying asset classes.
The adoption of this guidance had a material impact on the Company's Condensed
Consolidated Balance Sheet beginning
The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, operating lease liability - current, and operating lease liability - noncurrent on the Company's condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The lease payments included in the present value are fixed lease payments. As most of the Company's leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments. The operating lease ROU assets include any payments made before the commencement date and exclude lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
BUSINESS OVERVIEW
The Company is a technology-based developer and manufacturer of diversified lines of products and derives revenue from the production and sale of electronics for medical devices and other applications; environmentally safe chemical products for industrial, medical and cosmetic uses; and, research, development, regulatory and engineering services. The Company has increased internal research and development by utilizing their engineering resources to advance their own proprietary medical device technologies.
The Company is a corporation that was organized under the laws of the
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED
Revenues for the three and six months ended
Gross profit for the three and six months ended
We are highly dependent upon certain customers. During the three months
ended
During the six months ended
During the three and six months ended
The complete loss of or significant reduction in business from, or a material adverse change in the financial condition of any of our customers could cause a material and adverse change in our revenues and operating results.
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Loss from operations for the three months ended
Loss from operations for the six months ended
Other income increased
The foregoing resulted in a net loss before provision for income taxes for the
three months ended
LIQUIDITY AND CAPITAL RESOURCES
At
Future Sources of Liquidity:
We expect that growth with profitable customers and continued focus on new customers will enable us to continue to generate cash flows from operating activities during fiscal 2022.
Based on current expectations, we believe that our existing cash and cash
equivalents of
OPERATING ACTIVITIES
Net cash used by operating activities was
INVESTING ACTIVITIES
No cash was provided for or used in investing activities for the six months
ended
FINANCING ACTIVITIES
For the six months ended
OFF BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have had 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.
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