ADM TRONICS UNLIMITED, INC. - Quarter Report: 2011 September (Form 10-Q)

admt_10q-093011.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

COMMISSION FILE NO. 0-17629

ADM TRONICS UNLIMITED, INC.

(Exact name of registrant as specified in its charter)

Delaware	22-1896032
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or organization)	Identification Number)

224-S Pegasus Ave., Northvale, New Jersey 07647

(Address of Principal Executive Offices)

Registrant's Telephone Number, including area code: (201) 767-6040

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 [ ]

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 (§232.405 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 [X] NO [ ]

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.

Large accelerated filer [ ]	Accelerated filer [ ]

Non-accelerated filer [ ] (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 Exchange Act).

YES [ ] NO [X]

State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date:

56,939,537 shares of Common Stock, $.0005 par value, as of November 14, 2011.

ADM TRONICS UNLIMITED, INC.

INDEX

Page Number

Part I - Financial Information

Item 1.

Consolidated Financial Statements:

Condensed Consolidated Balance Sheet - September 30, 2011 (unaudited) and March 31, 2011

Condensed Consolidated Statement of Operations for the three and six months ended September 30, 2011 and 2010 (unaudited)

Condensed Consolidated Statements of Cash Flow for the six months ended September 30, 2011 and 2010 (unaudited)

Notes to the Condensed Consolidated Financial Statements (unaudited)

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II - Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Other Information

Item 5.

Exhibits

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			March 31,
	2011			2011
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	164,090		$	155,149
Accounts receivable, net of allowance for doubtful accounts of $329 and $529, respectively		224,636			115,844
Inventories		293,600			232,499
Prepaid expenses and other current assets		48,984			20,441
Restricted cash		231,102			230,559

Total current assets		962,412			754,492

Property and equipment, net of accumulated depreciation of $63,515 and $56,421, respectively		34,534			41,627

Other assets:
Inventory - long term portion		29,232			31,951
Secured convertible note		59,844			57,337
Advances to related parties		28,589			28,589
Intangible assets, net of accumulated amortization of $138,534 and $124,168, respectively		129,614			140,396
Other assets		16,109			16,109
Total other assets		263,388			274,382

Total assets	$	1,260,334		$	1,070,501

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	191,729		$	184,122
Note payable - bank		166,000			172,000
Note payable - other		6,650			13,900
Customer deposit payable		150,816			-
Accrued expenses and other current liabilities		119,916			56,457
Total current liabilities		635,111			426,479

Total liabilities		635,111			426,479

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, 56,939,537 shares issued and outstanding at September 30, 2011 and March 31, 2011		28,470			28,470
Additional paid-in capital		32,173,097			32,173,097
Accumulated deficit		(31,576,344	)		(31,557,545	)
Total stockholders' equity		625,223			644,022

Total liabilities and stockholders' equity	$	1,260,334		$	1,070,501

The accompanying notes are an integral part of these consolidated financial statements.

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

(Unaudited)

	Three months ended						Six months ended
	September 30,						September 30,
	2011			2010			2011			2010

Net revenues	$	472,689		$	264,730		$	891,751		$	617,523

Cost of sales		191,252			155,389			405,463			322,100

Gross Profit		281,437			109,341			486,288			295,423

Operating expenses:
Research and development		8,697			10,007			18,001			24,693
Selling, general and administrative		230,966			290,218			466,768			525,341
Depreciation and amortization		10,693			10,782			21,460			21,510

Total operating expenses		250,356			311,007			506,229			571,544

Income (loss) from operations		31,081			(201,666	)		(19,941	)		(276,121	)

Other income (expense):
Interest income		1,599			2,047			3,240			4,546
Interest expense		(1,034	)		(1,319	)		(2,098	)		(2,680	)
Total other income (expense)		565			728			1,142			1,866


Net income (loss)	$	31,646		$	(200,938	)	$	(18,799	)	$	(274,255	)

Basic and diluted income (loss) per common share:	$	0.00		$	(0.00	)	$	(0.00	)	$	(0.01	)

Weighted average shares of common stock outstanding - basic and diluted		56,939,537			53,939,537			56,939,537			53,939,537

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 SIX MONTHS ENDED

	September 30,			September 30,
	2011			2010
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(18,799	)	$	(274,255	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		21,460			21,510
Bad debt recovery		-			(1,620	)
Interest receivable		(2,507	)		(2,181	)
Changes in operating assets and liabilities:
Accounts receivable		(108,792	)		(55,884	)
Inventory		(58,382	)		12,620
Prepaid expenses and other current assets		(37,010	)		(5,008	)
Accounts payable		16,073			71,475
Customer deposit payable		150,816			-
Accrued expenses and other current liabilities		63,459			31,253
Net cash provided by (used in) operating activities		26,318			(202,090	)

Cash flows from investing activities:
Repayment (advances to) from related party		-			16,760
Payment for patents and trademark costs		(3,584	)		(5,685	)
Deposit - restricted cash		(543	)		(1,097	)
Net cash provided by (used in) investing activities		(4,127	)		9,978

Cash flows from financing activities:
Repayments on note payable - Bank		(6,000	)		(6,000	)
Repayments on note payable - Other		(7,250	)		(8,700	)

Net cash used in financing activities		(13,250	)		(14,700	)

Net increase (decrease) in cash		8,941			(206,812	)

Cash and cash equivalents beginning of period		155,149			690,975

Cash and cash equivalents at end of period	$	164,090		$	484,163

Cash paid for:
Interest	$	2,098		$	2,680
Income taxes	$	-		$	3,460

Supplemental disclosures of non-cash investing and financing activities:
Accrued interest on note receiveable	$	2,507		$	-
Increase in prepaid insurance and accounts payable	$	8,466		$	4,613

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ADM TRONICS UNLIMITED, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011

(Unaudited)

NOTE 1 - ORGANIZATIONAL MATTERS

ADM Tronics Unlimited, Inc. ("we", "us", the “Company" or "ADM"), was incorporated under the laws of the state of Delaware on November 24, 1969. We are authorized under our Certificate of Incorporation to issue 150,000,000 common shares, with $.0005 par value, and 5,000,000 preferred shares with $.01 par value.

The accompanying condensed consolidated financial statements as of September 30, 2011 (unaudited) and March 31, 2011 and for the six month periods ended September 30, 2011 and 2010 (unaudited) have been prepared by ADM pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements and the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the audited financial statements and explanatory notes for the year ended March 31, 2011 as disclosed in our annual report on Form 10-K for that year as filed with the SEC, as it may be amended. The results of the six months ended September 30, 2011 (unaudited) are not necessarily indicative of the results to be expected for the pending full year ending March 31, 2012.

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 July 17, 2009, we purchased the assets of Antistatic Industries of Delaware Inc., (“Antistatic”) 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.

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 were currently distributed in South Africa, and were not compliant with United States FDA requirements for distribution in the United States. During the year ended March 31, 2011, we substantially completed development of a new version of the device for compliance with FDA and international standards and created the required documentation for distribution of this product in the US. In July 2011, an order was received from a distributor for $717,800, including a 25% cash deposit for the purchase of the Flo-Med device and related disposables. Production of the Flo-Med device and disposables commenced during the period and the complete order is expected to be shipped over the next 3 to 6 months.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The unaudited condensed 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 unaudited 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 assets, 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

The Company follows the accounting pronouncements with respect to fair value measurements. Please refer to Note 4 for additional details. For certain of our financial instruments, including accounts receivable, inventories, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities. Loans approximate their fair value (using level three inputs) as the current interest rates on such instruments approximate current market rates on similar instruments.

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.

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. 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. Historically, the amount of warranty revenue included in the sales of our electronic products has been de minimis. We have no other post shipment obligations and sales returns have been de minimis.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs consist of expenditures for the research and development of patents and technology which are not capitalizable. Our research and development costs consist mainly of labor costs in developing new products.

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. These product lines’ past experience has resulted in de minimus costs associated with warranty issues.

Based on prior experience, no amounts have been accrued for potential warranty costs and such costs were nominal, for the six months ended September 30, 2011 and 2010.

RESTRICTED CASH

Restricted cash represents funds on deposit with a financial institution that secure the bank note payable which is discussed in “Note 10 – Note Payable, Bank”.

NET LOSS PER SHARE

The Company computes net loss per share under the provisions of ASC No. 260, "Earnings per Share" ("ASC 260"), and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of ASC 260 and SAB 98, basic loss per share is computed by dividing the Company's net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes potential common shares if the effect is anti-dilutive. Diluted loss per share is determined in the same manner as basic loss per share except that the number of shares is increased assuming exercise of dilutive stock options and warrants using the treasury stock method. As the Company had a net loss, the impact of the assumed exercise of the stock options is anti-dilutive and as such, these amounts have been excluded from the calculation of diluted loss per share. For the six month periods ended September 30, 2011 and 2010, respectively, -0- and 2,750,000 common stock and common stock equivalent shares were excluded from the computation of diluted net loss per share.

NON-CASH INVESTING ACTIVITY

Non-cash investing activity is excluded from the consolidated statement of cash flows. For the six months ended , September 30, 2011 the non-cash activities based on the year ended March 31, 2010, included the following:

Asset Acquisition of Antistatic Industries of Delaware, Inc.:
Fair Value of assets acquired in fiscal year 2010	$	66,920

Cash paid to Seller	$	(26,920	)
Cash paid to Seller under Note Payable		(33,350	)
Note payable outstanding at September 30, 2011		(6,650	)
	$	(66,920	)

Year ended March 31, 2010 Asset Acquisitions
Details of Acquisition
Fair Value of assets acquired in fiscal year 2010	$	66,920
Note Payable balance at September 30, 2011		(6,650	)
Total cash paid for acquisition	$	60,270

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2011 the FASB issued Accounting Standards Update 2011-05 affecting ASC 220, Other Comprehensive Income. The effective date is for fiscal periods beginning after December 15, 2011. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The Company is evaluating the implications of this Statement.

On April 1, 2011 we adopted Accounting Standards Update 2009-13 that revised the guidance for revenue recognition with multiple deliverables. These new standards impact the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. The adoption did not have a material impact on its consolidated financial positions or results of operations.

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 at September 30, 2011 (unaudited) consisted of the following:

	Current		Long Term		Total
Raw materials	$	261,381	$	25,624	$	287,005
Finished Goods		32,219		3,608		35,827
	$	293,600	$	29,232	$	322,832

Inventory at March 31, 2011 consisted of the following:

	Current		Long Term		Total
Raw materials	$	177,606	$	28,252	$	205,858
Finished Goods		54,893		3,699		58,592
	$	232,499	$	31,951	$	264,450

The Company values its inventories at the first in, first out ("FIFO") method at the lower of cost or market.

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company follows 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 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.

The following table presents assets measured at fair value on a recurring basis at September 30, 2011:

		Level 1				Level 2				Level 3				Total
Investment in ITI		$	21,125			$	(21,125	)		$	--			$	--

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 disclosed to the public through its filings with the SEC, that 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 the quarter ended June 30, 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, 2011:

		Level 1				Level 2				Level 3				Total
Investment in ITI		$	29,250			$	(29,250	)		$	--			$	--

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. The Company invested a total of $50,000, with $10,000 provided in cash, and $40,000 in services to Wellington. The Company recorded a convertible note with a principal amount of $50,000 with an interest rate of 10% due at various dates through September 2011. The original note and accrued interest was due June 30, 2011. As of September 30, 2011 and March 31, 2011 those balances were $59,844 and $57,337, respectively.

On September 4, 2011, the Company agreed to extend the due date to December 4, 2011 under the same terms of the original note.

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 5.6 years.

	September 30, 2011							March 31, 2011
	Cost		Accumulated Amortization			Net Carrying Amount		Cost		Accumulated Amortization			Net Carrying Amount
Patents & Trademarks	$	82,702		(61,355	)	$	21,347	$	79,118	$	(60,218	)	$	18,900
Formulas		25,446		(3,746	)		21,700		25,446		(2,898	)		22,548
Non-Compete Agreement		50,000		(22,024	)		27,976		50,000		(18,452	)		31,548
Controller Design		100,000		(44,048	)		55,952		100,000		(36,905	)		63,095
Customer List		10,000		(7,361	)		2,639		10,000		(5,695	)		4,305
	$	268,148	$	(138,534	)	$	129,614	$	264,564	$	(124,168	)	$	140,396

Amortization expense was $14,366 and $14,291 for the six months ended September 30, 2011 and 2010, respectively.

Estimated aggregate future amortization expense related to intangible assets is as follows:

2012	$	14,472
2013		26,180
2014		25,114
2015		25,064
2016		12,020
Thereafter		26,764
	$	129,614

NOTE 7 – CONCENTRATIONS

The Company’s customer base is comprised of foreign and domestic entities with diverse demographics. Revenues from foreign customers represented $45,804 of net revenue or 9.7% for the three months ended September 30, 2011 and $114,916 of net revenue or 12.9% of net revenue for the six months ended September 30, 2011. Revenues from foreign customers represented $35,685 of net revenue or 13% for the three months ended September 30, 2010 and $59,893 of net revenue or 9.7% of net revenue for the six months ended September 30, 2010.

Accounts receivable from foreign entities as of September 30, 2011 and March 31, 2011 were $5,610 and $2,573, respectively.

During the three month period ended September 30, 2011, two customers accounted for 39% of our revenue. As of September 30, 2011, three customers represented approximately 77% of our accounts receivable.

During the three month period ended September 30, 2010, three customers accounted for 37% of our revenue, during such period IHS accounted for 5% of our revenue. As of September 30, 2010, two customers represented approximately 42% of our accounts receivable.

During the six month period ended September 30, 2011, two customers accounted for 29% of our revenue. As of March 31, 2011, one customer represented approximately 28% of our accounts receivable.

During the six month period ended September 30, 2010, two customers accounted for 32% of our revenue, during such period IHS accounted for 5% of our revenue. As of September 30, 2010, two customers represented approximately 42% of our accounts receivable.

NOTE 8 - SEGMENT INFORMATION

Information about segments is as follows:

	Chemical			Electronics			Total
Three months ended September 30, 2011
Revenue from external customers	$	252,232		$	220,457		$	472,689
Segment operating income (loss)	$	28,848		$	2,233		$	31,081

Three months ended September 30, 2010
Revenue from external customers	$	203,033		$	61,697		$	264,730
Segment operating income (loss)	$	(45,930	)	$	(155,736	)	$	(201,666	)

Six months ended September 30, 2011
Revenue from external customers	$	545,236		$	346,515		$	891,751
Segment operating income (loss)	$	53,549		$	(73,490	)	$	(19,941	)

Six months ended September 30, 2010
Revenue from external customers	$	478,401		$	139,122		$	617,523
Segment operating income (loss)	$	(19,108	)	$	(257,013	)	$	(276,121	)

Total assets at September 30, 2011	$	824,177		$	436,157		$	1,260,334

Total assets at March 31, 2011	$	462,681		$	607,820		$	1,070,501

NOTE 9 - RELATED PARTY TRANSACTIONS

ADVANCES TO RELATED PARTIES

As of September 30, 2011 and March 31, 2011 total accrued interest on prior loans to an officer was $28,589 and $28,589, respectively.

NOTE 10 – 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 September 30, 2011 and March 31, 2011 was $166,000 and $172,000, respectively.

NOTE 11 – 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 $14,500 was paid during the fiscal year ended March 31, 2011, $38,520 was paid during the fiscal year ended March 31, 2010, $7,250 was paid during the six months ended September 30, 2011, and the balance of $6,650 is a note payable, bearing imputed interest rate of 3.5% per annum, which will be repaid over the next 2 months from November to December 2011. As of September 30, 2011, ADM has one installment and a bulk payment due and will be paid as part of the next two installments.

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 12 – CUSTOMER DEPOSIT

In July 2011 the Company received a deposit of $179,450 in conjunction with an order for 200 units of the FloMed device. During the three month period ended September 30, 2011, we recognized $126,920 in revenue from the sale of the FloMed.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our operations and financial condition should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-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 March 31, 2011.

CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION:

CHEMICALS:

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 is recognized upon shipment of product to the end user. Shipping and handling charges and costs are 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. Historically, the amount of warranty revenue included in the sales of our electronic products have been de minimis. We have no other post shipment obligations and sales returns have been de minimis.

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. These product lines’ past experience has resulted in de minimis costs associated with warranty issues. Based on prior experience, no amounts have been accrued for potential warranty costs and such costs were de minimus, for the three and six months ended September 30, 2011 and 2010.

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 US. 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.

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, 2011 and 2010, our operations were conducted through ADM itself and its subsidiaries, Pegasus Laboratories, Inc. (PLI) and Sonotron Medical Systems, Inc and since August 2008, Action. 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. 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. 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.

In 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 were not compliant with United States FDA requirements for distribution in the United States. During the year ended March 31, 2011, we substantially completed development of a new version of the device (Flo-Med device) for compliance with FDA and international standards and created the required documentation for distribution of this product in the US. In July, an order was received from a distributor for approximately $740,000 including a 25% cash deposit for the purchase of the Flo-Med device and related disposables. Production of the Flo-Med device and disposables commenced during the period and the complete order is expected to be shipped over the next 3 to 6 months

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) electronic products for numerous industries, including therapeutic non-invasive electronic medical devices and electronic controllers for spas and hot tubs, (3) cosmetic and topical dermatological products and (4) Antistatic paint and coatings 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 electronics and topical dermatological products. Our Electronics segment includes our Action and SMS subsidiaries, and our Chemical segment includes our PLI subsidiary.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AS COMPARED TO SEPTEMBER 30, 2010

REVENUES

Net revenues were $472,698 for the three months ended September 30, 2011 as compared to $264,730 for the three months ended September 30, 2010, an increase of $207,959, or 79 %. The increase resulted from an increase in sales to customers in our electronics division in the amount of $158,760, and an increase in sales in our chemical division in the amount of $49,199. The sale of the FloMed product to a customer accounted for $126,920 of revenue in our electronic division during the three and six months ended September 30, 2011. Gross profit was $281,437, or 60%, for the three months ended September 30, 2011 and $109,341, or 41% for the three months ended September 30, 2010. Gross profit percentages increased overall 19% due to an overall cost of material percentage decrease of 6%, while labor cost percentages dropped 11% from 21% of sales in 2010 to 10% of sales in 2011

We are highly dependent upon certain customers to generate our revenues. During the three month period ended September 30, 2011, two customers accounted for 39% of our revenue and for the three months ended September 30, 2010 two customers accounted for 40% of our accounts receivable. 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.

OPERATING INCOME / LOSS

Income from operations for the three months ended September 30, 2011 was $31,081 compared to a loss from operations for the three months ended September 30, 2010 of $201,666. Selling, general and administrative expenses decreased by $59,252, from $290,219 as of September 30, 2010 to $230,966 as of September 30, 2011. We had decreased compensation costs in the amount of approximately $22,000, decreased engineering costs in the amount of approximately $59,000 and decreased health insurance costs in the amount of approximately $9,500. These decreases were offset with increased accounting fees of $10,186. Cost of sales increased by $35,863 or 23% from $155,389 as of September 30, 2010 to $191,252 as of September 30, 2011 due to an increase in sales in our electronics, chemical and Action subsidiary.

NET LOSS AND NET LOSS PER SHARE

Net income for the three months ended September 30, 2011 was $31,646, or $0.00 per share, compared to a net loss for the three months ended September 30, 2010 of $200,938, or $0.00 per share. Interest income decreased $448 to $1,599 in the three months ended September 30, 2011, from $2,047 in the three months ended September 30, 2010, due to decreased funds invested in a money market account, offset by an increase in accrued interest receivable on a convertible note issued to Wellington.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2011 AS COMPARED TO SEPTEMBER 30, 2010

REVENUES

Net revenues were $891,751 for the six months ended September 30, 2011 as compared to $617,523 for the six months ended September 30, 2010, an increase of $274,228, or 44 %. The increase in the six month revenue ending September 30, 2011 resulted from an increase in sales to customers in our electronics division in the amount of $207,393 over the six month period ended September 30, 2010 revenues and an increase in sales in our chemical division in the amount of $66,835 over the six month period ended September 30, 2010. The delivery of the FloMed product accounted for $126,926 of revenue in our electronic division during the three and six months ended September 30, 2011. Gross profit was $486,288 or 55%, for the six months ended September 30, 2011 and $295,423 or 48% for the six months ended September 30, 2010. Gross profit percentages increased overall 7% due to an overall labor cost percentages decrease of 5% from 16% of sales in 2010 to 11% of sales in 2011.

We are highly dependent upon certain customers to generate our revenues. During the six month period ended September 30, 2011, two customers accounted for 39% of our revenue and for the six months ended September 30, 2010 two customers accounted for 40% of our accounts receivable. 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.

OPERATING INCOME / LOSS

Loss from operations for the six months ended September 30, 2011 was $19,941 compared to a loss from operations for the six months ended September 30, 2010 of $276,121. Selling, general and administrative expenses decreased by $58,573, from $525,341 as of September 30, 2010 to $466,768 as of September 30, 2011. We had decreased compensation costs of $15,850, decreased engineering costs in the amount of $50,208. These decreases were offset with increased travel expense of approximately $4,000. Cost of sales increased by $83,363 or 26% from $322,100 as of September 30, 2010 to $405,463 as of September 30, 2011 due to an increase in sales in our electronics, chemical and Action subsidiary.

NET LOSS AND NET LOSS PER SHARE

Net loss for the six months ended September 30, 2011 was $18,799, or $0.00 per share, compared to a net loss for the six months ended September 30, 2010 of $274,255, or $0.00 per share. Interest income decreased $1,306 to $3,240 in the six months ended September 30, 2011, from $4,546 in the six months ended September 30, 2010, due to decreased funds invested in a money market account, offset by an increase in accrued interest receivable on a convertible note issued to Wellington.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2011, we had cash and cash equivalents of $164,090 as compared to $155,149 at March 31, 2011. The increase was primarily the result of an increase in cash used in operations during the six month period in the amount of $26,318 , cash used in financing activities in the amount of $13,250. Our cash will continue to be used for increased marketing costs, and the related administrative expenses, in order to attempt to increase our revenue. We expect to have enough cash to fund operations for the next twelve months.

On July 17, 2009 we purchased the assets of Antistatic, 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 $4,350 was paid during the quarter ended September 30, 2011, $2,900 was paid during the quarter ended June 30, 2011, $14,500 was paid during the fiscal year ended March 31, 2011, $38,520 was paid during the fiscal year ended March 31, 2010, and the balance of $6,650 is a note payable, bearing imputed interest rate of 3.5% per annum, which will be repaid over the next 2 months.

Future Sources of Liquidity:

We expect our primary source of cash during fiscal 2012 to be net cash provided by operating activities. We expect that growth in revenues and continued focus on new customers will enable us to continue to generate cash flows from operating activities. In addition, management has decided to participate in a state program for the sale of $7 million of its state net operating tax losses. However, there can be no assurance that the Company will be able to receive any cash under this state program due to required regulatory approval and funding limits of the state program.

If we do not generate sufficient cash from operations, face unanticipated cash needs or do not otherwise have sufficient cash, we may need to consider the sale of certain intellectual property which does not support the Company’s operations. In addition, we have the ability to reduce certain expenses depending on the level of business operation.

Based on current expectations, we believe that our existing cash of $164,090 as of September 30, 2011 and our net cash provided by operating activities and other potential sources of cash will be sufficient to meet our cash requirements. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

OPERATING ACTIVITIES

Net cash provided by operating activities was $26,318 for the six months ended September 30, 2011, as compared to net cash used by operating activities of $202,090 for the six months ended September 30, 2010. The increase of cash during the six months ended September 30, 2011 was primarily due to net loss of $18,799, an increase in accounts receivable of $108,792 and an increase in prepaid expenses of $37,010 offset with an increase in accrued expenses of $63,459 and a deposit payable from a customer in the amount of $179,450.

Net cash used during the six months ended September 30, 2010 was primarily due to a net loss of $274,255 during the period offset by increases in accrued expenses and account payable.

INVESTING ACTIVITIES

Net cash used in investing activities was $4,127 for the six months ended September 30, 2011, mainly as a result of the purchase of patents during the period.

Net cash provided in investing activities was $9,978 for the six months ended September 30, 2010 mainly due to an advance from a related party in the amount of $16,760 offset by payments for patents and trademarks of $5,685 and deposits into a restricted cash account of $1,097.

FINANCING ACTIVITIES

For the six months ended September 30, 2011, net cash used for financing activities was $13,250, of which $6,000 was used for repayment on a note from a commercial bank to facilitate our acquisition of Action and $7,250 was used for repayment of notes payable – other.

For the six months ended September 30, 2010, net cash used for financing activities was $14,700, of which $6,000 was used for repayment on a note from a commercial bank to facilitate our acquisition of Action. In addition, $8,700 was used for repayment of notes payable – other.

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 that is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Concentration of Credit Risk

All cash and cash equivalents are deposited FDIC insured financial institutions. Further, our sales are materially dependent on a small group of customers, as noted in Note 7 of our financial statements. We monitor our credit risk associated with our receivables on a routine basis. We also maintain credit controls for evaluating and granting customer credit.

ITEM 4. 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 SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

As of the end of the period covered by this Quarterly Report on Form 10-Q, 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 Exchange Act Rule 13a-15. Based on that evaluation as of September 30, 2011, 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 Exchange Act) were effective, as of the date of their evaluation, to ensure that the information required to be disclosed by us in the reports that we file or submit, under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended March 31, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. OTHER INFORMATION

None

ITEM 5. EXHIBITS.

(a) Exhibit No.

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS** XBRL Instance

101.SCH** XBRL Taxonomy Extension Schema

101.CAL** XBRL Taxonomy Extension Calculation

101.DEF** XBRL Taxonomy Extension Definition

101.LAB** XBRL Taxonomy Extension Labels

101.PRE** XBRL Taxonomy Extension Presentation

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ADM TRONICS UNLIMITED, INC.

(Registrant)

	By:	/s/ Andre' DiMino
		Andre' DiMino, Chief Executive
		Officer and Chief Financial Officer

Dated:	Northvale, New Jersey
	November 14, 2011