Note 2 - Significant Accounting Policies

6 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE 2  - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by ADM pursuant to accounting principles generally accepted in the United States of America (“GAAP”) and 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 condensed financial position and operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and explanatory notes for the year ended March 31, 2025 as disclosed in our annual report on Form 10-K for that year. Unaudited interim results are not necessarily indicative of the results for the full fiscal year ending March 31, 2026. The consolidated balance sheet as of March 31, 2025 was derived from the audited consolidated financial statements as of and for the year then ended.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of ADM Tronics Unlimited, Inc. and its wholly owned subsidiary, Sonotron (the “Company”). 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 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 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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For certain of our financial instruments, including accounts receivable, accounts payable, and accrued expenses, the carrying amounts approximate fair value due to their relatively short maturities.

CASH AND CASH EQUIVALENTS

Cash equivalents are comprised of highly liquid investments with original 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. Cash and cash equivalents held in these accounts are currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000. At September 30, 2025 and March 31, 2025, approximately $71,000 and $133,000, respectively, exceeded the FDIC limit. 

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

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 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

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 expense included in sales of our electronic products has been de minimis. We have no other post shipment obligations. For contract manufacturing, revenues are recognized after shipments of the completed products.

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 $58,000 and $100,000 as of March 31, 2025 were recognized as revenues during the three and six months ended September 30, 2025, respectively.

Customer deposits of approximately $24,000 and $76,000 as of March 31, 2024 were recognized as revenues during the three and six months ended September 30, 2024. 

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 over time as the applicable performance obligations are satisfied.

All revenue is recognized net of discounts.

WARRANTY LIABILITIES

The Company’s provision for estimated future warranty costs is based upon historical relationship of warranty claims to sales. Based upon historical experience, the Company has concluded that no warranty liability is required as of the consolidated balance sheet dates. However, the Company periodically reviews the adequacy of its product warranties and will record an accrued warranty reserve if necessary.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) and net realizable value. Inventories that are expected to be sold within one operating cycle (1 year) are classified as a current asset. Inventories that are not expected to be sold within 1 year, based on historical trends, are classified as Inventories - long term portion. Obsolete inventory is written off based on prior and expected future usage.

Long-Term Inventory: Due to recent shortages of materials due to various issues, when an item the Company believes will be used in the future, even beyond the current fiscal year, becomes available, it will purchase as many items as management deems necessary to fulfill future orders.

PROPERTY AND EQUIPMENT

We record our property and 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. As of September 30, 2025 and March 31, 2025, all fixed assets were fully depreciated.

INTANGIBLE ASSETS

Intangible assets are reviewed for impairment annually whenever changes in circumstances indicate that the carrying amount may not be recoverable. In reviewing for impairment, the Company compares the carrying value of the relevant asset to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and its carrying value. During the fiscal three and six months ended September 30, 2025 and 2024, there were no impairments.

ADVERTISING COSTS 

Advertising costs are expensed as incurred and amounted to $3,037 and $1,282 and $5,047 and $4,434 for the three and six months ended September 30, 2025 and September 30, 2024, respectively.  

SHIPPING AND HANDLING COSTS

Shipping and handling costs incurred for the three and six months ended September 30, 2025 were $4,635. Shipping and handling costs incurred for the three and six months ended September 30, 2024 were $2,938 and $5,739, respectively. Such costs are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

INCOME TAXES

We report the results of our operations as part of a consolidated Federal tax return with our subsidiary. 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 basis and tax basis 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.

The Company has adopted the authoritative accounting guidance 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 consolidated 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 consolidated 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.

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, 2025 as follows:

Jurisdiction	Fiscal Year
Federal	2021 and beyond
New Jersey	2020 and beyond

There are currently no tax years under examination by any major tax jurisdictions.

The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of September 30, 2025, and 2024, the Company has no accrued interest or penalties related to uncertain tax positions.

NET EARNINGS PER SHARE

We compute basic earnings per share by dividing net income/loss by the weighted average number of common shares outstanding. Diluted earnings per share is computed similar to basic earnings 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 earnings per share if their effect is anti-dilutive.

There were zero (-0-) and 200,000 anti-dilutive instruments in force during the periods ended September 30, 2025 and 2024, respectively.

Per share basic and diluted income / (loss) per share amounted to $(0.00) and $(0.00) and $0.00 and $0.00 for the three and six months ended September 30, 2025 and 2024, respectively.

LEASES

In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which changed financial reporting as it relates to leasing transactions. Under the new guidance, lessees are required to recognize a lease liability, measured on a discounted basis; and a right-of-use asset, for the lease term. The Company adopted this guidance as of April 1, 2019, using the modified retrospective approach which allowed it to initially apply the guidance as of the adoption date. The Company elected the package of practical expedients available under the new standard, which allowed the Company to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) the initial direct costs for any existing leases.

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.

NEW ACCOUNTING STANDARDS 

In June 2016, the FASB issued ASU 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance affects entities holding financial assets and net investments in leases that are not measured at fair value through net income. The standard replaces the incurred loss model with the current expected credit loss (“CECL”) model, which requires organizations to measure all expected credit losses for financial instruments over their contractual life at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted this standard effective April 1, 2024. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023‑08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350‑60): Accounting for and Disclosure of Crypto Assets.” This guidance requires entities to measure certain crypto assets at fair value with changes in fair value recognized in net income and to present crypto assets separately on the balance sheet and in the income statement. The Company adopted this guidance effective April 1, 2024. The adoption did not have a material impact on the Company’s consolidated financial statements, as the Company does not hold any material crypto asset balances.

In December 2023, the FASB issued ASU 2023‑09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance enhances the transparency of income tax disclosures by requiring disaggregated information about a reporting entity’s effective tax rate reconciliation and the jurisdictions in which income taxes are paid. The Company adopted this guidance effective April 1, 2024. The Company has applied the provisions of this ASU prospectively, and the adoption has resulted in expanded disclosures in Note 16 to the consolidated financial statements.

In March 2024, the FASB issued ASU 2024‑01, “Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards.” This standard clarifies how an entity determines whether a profits interest or similar award is subject to the guidance in Topic 718. The Company adopted this guidance effective April 1, 2024. The adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2023, the FASB issued ASU 2023‑05, “Business Combinations—Joint Venture Formations (Subtopic 805‑60): Recognition and Initial Measurement.” This standard requires that a joint venture, upon formation, recognize and initially measure its net assets at fair value. The guidance is effective for joint venture formations with formation dates on or after January 1, 2025. The Company has not formed any qualifying joint ventures during the reporting period. The guidance will be applied prospectively to any future joint venture formations.

In March 2025, the FASB issued ASU 2025‑02, “Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 122 (SAB 122).” This update removes references to previously issued SEC staff guidance regarding the safeguarding of crypto assets. The Company adopted this amendment in the period ended March 31, 2025. The adoption did not have a material impact on the Company’s consolidated financial statements.

The Company is currently evaluating the impact of other recently issued accounting pronouncements that are not yet effective but does not expect them to have a material impact on its consolidated financial statements upon adoption.

INVESTMENTS

Investments in publicly  held companies are recorded at fair value.

Investments in privately held companies are valued at cost, net book value or fair value when available. Investments valued at cost or net book value is a departure from accounting principles generally accepted in the United States of America

GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced losses from operations and negative cash flows from operating activities, management has initiated several strategic plans to improve the Company's financial position. As of September 30, 2025, the Company had an accumulated deficit of $32,761,142 and cash used by operating activities of  $(63,282). Management's plans to address these conditions include leveraging existing resources and focusing on revenue growth and orders in the pipeline, which are expected to push the Company to profitability within the next fiscal year. 

There is substantial doubt that the funding plans will be successful and therefore the conditions discussed above have not been alleviated. As a result, there is substantial doubt about the Company’s ability to continue as a going concern for one year from November 13, 2025, the date the Consolidated Financial Statements were available to be issued.

Our future capital requirements will depend upon many factors, including progress with developing, manufacturing and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline as well as new customers. We also will be required to efficiently manufacture and deliver equipment on those purchase orders. These activities, including our planned research and development efforts, will require significant uses of working capital. There can be no assurances that we will generate revenue and cash flow as expected in our current business plan.