FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission file number 0-12984
ADVANCED TOBACCO PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2285214
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
16607 Blanco Road, Suite 1504, San Antonio, Texas 78232
(Address of principal executive offices) (Zip Code)
(210) 408-7077
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No N/A
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
8,092,136 as of December 31, 1996
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
BALANCE SHEETS
(Unaudited) (Audited)
December 31 June 30
1996 1996
ASSETS:
CURRENT ASSETS:
Cash & cash equivalents $ 47,304 $ 84,918
Investments 305,225 237,434
Accounts receivable 76,934 -0-
Total current assets 429,463 322,352
LICENSE AGREEMENTS, Net: 156,122 154,809
INVESTMENTS: 978,900 1,007,837
Total assets $1,564,485 $1,484,998
LIABILITIES AND SHAREHOLDERS'
EQUITY:
LIABILITIES:
Accounts payable $ 16,818 $ 3,528
Accrued liabilities 17,500 -0-
Total liabilities 34,318 3,528
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value;
30,000,000 shares authorized;
8,092,136 and 7,952,136
shares outstanding as of
December, 1996, and June,
1996, respectively 80,922 79,522
Additional paid-in-capital 12,544,878 12,528,778
Accumulated deficit (11,095,633) (11,126,830)
Total stockholders' equity 1,530,167 1,481,470
Total liabilities and
stockholders' equity $1,564,485 $1,484,998
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF INCOME
(Unaudited)
Three Months Ended December 31
1996 1995
REVENUES:
Royalty Income $78,200 $ -0-
Total operating revenues: 78,200 -0-
EXPENSES:
General and administrative 30,177 16,741
Total operating expenses: 30,177 16,741
INCOME (LOSS) FROM OPERATIONS 48,023 (16,741)
OTHER INCOME:
Interest Income 21,786 19,266
Total other income 21,786 19,266
NET INCOME (LOSS): $69,809 $ 2,525
WEIGHTED AVERAGED NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING: 8,069,310 7,792,136
EARNINGS (LOSS) PER COMMON SHARE: $ .01 NIL
(Unaudited)
Six Months Ended December 31
1996 1995
REVENUES:
$78,200 $ -0-
Total operating revenues: 78,200 -0-
EXPENSES:
General and Administrative 87,519 57,921
Total operating expenses 87,519 57,921
INCOME (LOSS) FROM OPERATIONS ( 9,319) ( 57,921)
OTHER INCOME:
Interest Income 40,516 39,132
Total other income 40,516 39,132
NET INCOME (LOSS): $31,197 $(18,789)
WEIGHTED AVERAGED NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 8,010,723 7,792,136
EARNINGS (LOSS) PER COMMON SHARE $ .004 $ (.002)
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended December 31
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss): $ 31,197 $(18,789)
Adjustments to reconcile net
income (loss) to net cash:
Amortization 3,340 3,340
Accounts receivable (76,934) -0-
Accounts payable and accrued
liabilities 30,790 4,738
Net cash provided by (11,607) (10,711)
operations:
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenses of license (4,653) (27,614)
agreements:
Net cash provided by
investments: (4,653) (27,614)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Exercise of Stock Option 17,500 -0-
Net cash provided by financing 17,500 -0-
NET INCREASE (DECREASE) IN CASH: 1,240 (38,326)
CASH & INVESTMENTS AT BEGINNING
OF PERIOD: 1,330,189 1,363,058
CASH & INVESTMENTS AT END
OF PERIOD: $1,331,429 $1,324,732
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The condensed financial statements included herein were
prepared by the Company without audit. Certain information and
footnote disclosures normally included in financial statements have
been omitted. The condensed financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K as of June 30,
1996.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operation
RESULTS OF OPERATIONS
In 1987, the Company sold nicotine technology to an entity
owned or controlled by Pharmacia & Upjohn, Inc. ("Pharmacia &
Upjohn"), a worldwide pharmaceutical company that manufactures the
Nicorette chewing gum and the Nicotrol patch.
Based upon the nicotine technology acquired from the Company,
Pharmacia & Upjohn developed a pharmaceutical nicotine inhaler for
use in the nicotine replacement therapy ("NRT") industry.
Pharmacia & Upjohn launched its nicotine inhaler commercially in
Denmark in September, 1996, and in Sweden in December, 1996, under
the trade name of Nicorette Inhaler and for the six-month period
ended December 31, 1996, the Company recognized $33,974 in revenue
as a result of these initial European sales. Additional launches
are planned by Pharmacia & Upjohn throughout Europe and worldwide
to occur as regulatory approvals are granted. Recent approvals have
been obtained in Italy and the Netherlands.
Pharmacia & Upjohn filed a New Drug Application ("NDA") with
the United States Food and Drug Administration ("FDA") for
regulatory approval of its nicotine inhaler in the Spring of 1996.
On December 13, 1996, the Drug Abuse Advisory Committee of the FDA
unanimously voted to recommend that the FDA clear the nicotine
inhaler for marketing as a prescription NRT. If cleared by the
FDA, the product will be marketed in the U.S. as the Nicotrol
Inhaler by McNeil Consumer Products, a Johnson & Johnson company.
The time required for regulatory agencies to review and
approve the NDA submissions cannot be determined in advance because
it is difficult to predict the specific questions or comments which
may be made by regulatory agencies; however, FDA approval in the
U.S. is expected in 1997 and currently, the U.S. represents
approximately 50% of the world NRT market.
The Company believes that the Pharmacia & Upjohn nicotine
inhaler has the potential for being the next generation of NRT
products following the transdermal nicotine patch. Information
presented to the FDA Committee stated that the Inhaler will help
smokers quit by being the first NRT to control a smoker's cravings
by addressing the hand-to-mouth motions of smokers as well as
providing a sensation in the back of the throat similar to the
feeling of inhaling smoke.
Effective as of October, 1993, the Company has an agreement
with Pharmacia & Upjohn under which, among other matters, the
Company has the right to receive a royalty equal to .1% of net
revenues received by Pharmacia & Upjohn from the sale of any
product using a nicotine impermeable copolymer technology covered
by, and subsequent to, the issuance of a patent in March, 1996.
Under the terms of the agreement, for the six-month period ended
December 31, 1996, the Company recognized $44,226 in revenue as the
result of the sale by Pharmacia & Upjohn of the Nicotrol patch.
In order to create future growth opportunities and take
advantage of emerging technologies, the Company licensed a dry
powder nicotine inhaler technology from Duke University in 1992 and
has had several U.S. patent filings subsequently approved. The
Company is continuing to seek a strategic partner to further
develop this technology.
LIQUIDITY AND CAPITAL RESOURCES
Cash resources, including investments, available on December
31, 1996, were approximately $1,330,000, as compared to approx-
imately $1,325,000, for December 31, 1995.
COMPARISON OF SELECTED FINANCIAL DATA
Operating Revenues for the six-month period ended December 31,
1996, increased to $78,200 as compared to $-0- for the six-month
period ended December 31, 1995. This increase is due to the
recognition of income from the nicotine inhaler product and the
nicotine impermeable copolymer technology.
Interest income for the six-month period ended December 31,
1996, increased to $40,516 as compared to $39,132 for the six month
period ended December 31, 1995. This increase is primarily due to
minor interest fluctuations.
Net income for the six-month period ended December 31, 1996,
increased to $39,132 as compared to a net loss of $18,789 for the
six-month period ended December 31, 1995. This increase is due to
the recognition of income from the nicotine inhaler product and the
nicotine impermeable copolymer technology.
General and administrative expenses for the six-month period
ended December 31, 1996, increased to $87,519 as compared to
$57,921 for the six-month period ended December 31, 1995. This
increase is primarily due to the award of a one-time bonus in the
amount of $17,500 to a consultant and a Director of the Company and
to the costs associated with press releases and mailings to
shareholders as a result of the nicotine inhaler marketing
introduction.
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
None
ABB0E342<PAGE>
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.
ADVANCED TOBACCO PRODUCTS, INC.
(Registrant)
Dated: February 14, 1997
By: /s/J. W. Linehan
J.W. Linehan, President,
Chief Executive Officer and
Chief Accounting Officer
ABB0E342
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