• Filing Date: 2018-08-20
  • Form Type: 10-Q
  • Description: Quarterly report
v3.10.0.1
Note 2 - Significant Accounting Policies
3 Months Ended
Jun. 30, 2018
Notes to Financial Statements  
Significant Accounting Policies [Text Block]
NOTE 
2
 - SIGNIFICANT ACCOUNTING POLICIES
 
PRINCIPLES OF CONSOLIDATION
 
The condensed consolidated financial statements include the accounts of ADM Tronics Unlimited, Inc. and its wholly owned subsidiary Sonotron Medical Systems, Inc. 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 of America ("US GAAP") 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.  
 
REVENUE RECOGNITION
 
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.
  
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 a limited 
5
-year warranty on our electronic controllers for spas and hot tubs. We have 
no
 other post shipment obligations. Based on prior experience, 
no
 amounts have been accrued for potential warranty costs and actual costs were less than 
$2,000,
 for each of the 
three
months ended
June 30, 2018
and
2017.
 For contract manufacturing, revenues are recognized after shipment of the completed products. 
 
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 as the services are provided. 
 
EARNINGS PER SHARE
 
Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the periods. 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.
  
Per share basic and diluted earnings amounted to 
$0.00
 for both the 
three
 months ended 
June 30, 2018
and
June 30, 2017, 
respectively. There were 
3,000,000
 common stock equivalents at 
June 30, 2018
and
2017,
 respectively.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
Effective
April 1, 2018
the Company adopted ASC Topic
606
“Revenue from Contracts with Customers”, using the modified retrospective method. This guidance supersedes nearly all existing revenue recognition guidance under US GAAP. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The Company has drafted its accounting policy for the new standard based on a detailed review of its business and contracts. Based on the new guidance, the Company will continue recognizing revenue at the time it’s products are shipped, and therefore adoption of the standard did
not
have a material impact on its financial statements and is
not
expected to have a material impact in the future.
 
In
July 2015,
the FASB issued ASU
2015
-
11,
“ Inventory. Simplifying the Measurement of Inventory.” This amendment requires companies to measure inventory at the lower of cost and net realizable value. The Company adopted this amendment in
April 2017,
and the implementation did
not
have a material impact on the Company's financial statements.
 
In
February 2016,
the FASB issued ASU
2016
-
02,
“Leases”, which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate and manufacturing equipment, to recognize both assets and liabilities on their balance sheet for the rights to use those assets for the lease term and obligations to make the lease payments created by those leases that have terms of greater than
12
months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. This ASU will be adopted by the Company in
April 2019.
We do
not
believe that this ASU will have a material impact on our financial statements.
 
In
June 2016,
the FASB issued ASU-
2016
-
13
“Financial Instruments – Credit Losses”. This guidance affects organizations that hold financial assets and net investments in leases that are
not
accounted for at fair value with changes in fair value reported in net income. The guidance requires organizations to measure all expected credit losses for financial instruments at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. It is effective for fiscal years beginning after
December 15, 2019.
The Company is evaluating the potential impact on the Company’s financial statements.
 
In
February 2018,
the FASB issued ASU
2018
-
02,
“Income Statement- Reporting Comprehensive Income (Topic
220
): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance gives businesses the option of reclassifying to retained earnings the so-called “stranded tax effects” left in accumulated other comprehensive income due to the reduction in the corporate income tax rate resulting from the
2017
Tax Cuts and Jobs Act. This amendment is effective for all organizations for fiscal years beginning after
December 15, 2018
and interim periods within those fiscal years. Early adoption is allowed. We do
not
believe that this ASU will have a material impact on our financial statements.
 
In
June 2018,
the FASB issued ASU
2018
-
07,
“Stock Compensation (Topic
718
): Improvements to Nonemployee Share-Based Payment Accounting.” This guidance intends to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. This amendment is effective for public companies with fiscal years beginning after
December 15, 2018,
include interim period within that fiscal year. Early adoption is permitted. This ASU does
not
apply to the company at this time.
 
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 consolidated financial statements.