UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
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)
State of Texas 74-2285214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16607 Blanco Road, Suite 1504 78232
San Antonio, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (210)408-7077
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
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 if disclosure or delinquent files pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
As of November 30, 2000, the aggregate market value of the voting
and non-voting common equity held by non-affiliates of the registrant was
approximately $2,300,000.
As of November 30, 2000, the number of outstanding shares of
Common Stock, $0.01 par value, of the registrant was 8,192,136.
PART I
ITEM 1. BUSINESS
Advanced Tobacco Products, Inc., d/b/a Advanced Therapeutic Products,
Inc. ("ATP"), maintains a website at
http://www/prnewswire.com/comp/117857.html.
History and Relationship with Pharmacia Corporation
ATP, 16607 Blanco Road, Suite 1504, San Antonio, Texas 78232,
(210) 408-7077, is a Texas corporation formed in April 1983.
ATP was organized to develop and market a product based upon
nicotine technology. In 1987, ATP sold its nicotine technology and
related assets to what is now known as Pharmacia Corporation ("PHA"), a
worldwide pharmaceutical company that manufactures the
Nicotrol /Nicorette Inhaler, Nicorette Chewing Gum, the
Nicotrol /Nicorette Patch and the Nicotrol /Nicorette Nasal Spray.
The nicotine technology acquired from ATP forms the basis of the
Nicotrol /Nicorette Inhaler ("Inhaler") developed by PHA for use in the
nicotine replacement therapy market. See "Pharmacia Corporation
Agreement." ATP receives product payments from sales of the Inhaler
outside the U.S. equal to 3% of PHA's net sales to pharmacy distributors.
Until June 30, 2000, payments from U.S. sales of the Inhaler were 9.9%
of PHA's net sales to McNeil Consumer Health Care ("McNeil"), a Johnson
& Johnson Company, which marketed the Inhaler to pharmacies.
Effective July 1, 2000, PHA reacquired, from McNeil, the rights to market
the Inhaler in the U.S. Payments from the U.S. sales of the Inhaler will
now be 3% of PHA's net sales.
The Inhaler was launched nationwide in the U.S. as a prescription
product in 1998. PHA has introduced the Nicorette Inhaler, primarily
as an over-the-counter product, in 16 European countries, Mexico,
Australia, New Zealand, Hong Kong, Taiwan and Singapore. ATP understands
that additional country launches are planned by PHA to occur as
regulatory approvals are granted.
The Inhaler is the only nicotine replacement product designed to
help control a smoker's cravings for cigarettes while providing a key
behavioral component of smoking--the hand-to-mouth ritual. The Inhaler
consists of a mouthpiece and a cartridge containing nicotine. The user
puffs on the mouthpiece to inhale the nicotine which is then absorbed
through the lining of the mouth.
Current Operations
ATP also has an agreement with PHA under which, among other
matters, ATP has the right to receive a royalty equal to .1% of net
revenues received by PHA from the sale of any product using a nicotine
impermeable copolymer technology. Under the terms of the agreement, ATP
receives royalties from the sales of the Nicotrol /Nicorette Patch
("Patch") by PHA.
In addition, ATP has an exclusive worldwide license to certain dry
powder nicotine inhaler technology from Duke University. ATP has
obtained several patents covering this technology. ATP believes that a
dry powder nicotine inhaler has the potential to be a future generation
nicotine replacement product.
Pharmacia Corporation Technology Purchase Agreement
ATP has the right to receive product payments from PHA with
respect to the Inhaler as follows:
Product payments of three percent (3%) of net sales (generally,
sales by PHA to wholesale distributors) payable on a country by country
basis for the greater of 10 years following the date of the first
commercial sales or the expiration of all issued patents enforceable in
such countries. If the net sales to wholesale distributors cannot be
obtained or are not disclosed, as was the case with regard to McNeil, net
sales are computed by multiplying the net sales of PHA to McNeil by 3.3
(in effect, product payments were 9.9% of PHA's sales to McNeil). There
are product payment limitations in the event of the sale of a nicotine
vapor product competitive with the Inhaler.
As of October 1999, ATP entered into a Modification Agreement (the
"Modification Agreement") with PHA to revise ATP's 1987 nicotine
technology agreements with PHA. The Modification Agreement provides:
Quarterly product payments instead of biannual product payments.
Deferral until 2003 of the fifty percent (50%)
reduction of product payments in excess of $1,000,000 per
year. This deferral will allow ATP the opportunity to reduce
its taxable income by maximizing the potential use of ATP's
net operating loss carryforwards, which begin to expire in
2001 (see discussion in the following paragraphs).
Clarification and/or definition of other administrative
matters.
Under ATP's original agreements with PHA, product payments in
excess of $1,000,000 per year are to be reduced by fifty percent (50%)
until the aggregate of such reductions equal the sum of $4,400,000 (the
$4,400,000 is solely part of the product payment calculation and not an
obligation of ATP). Under the Modification Agreement, the $4,400,000
amount remains; however, reductions in product payments are deferred as
further described herein.
For ATP's tax years ending June 30, 1999, June 30, 2000, and June
30, 2001 (see Item 7(a)), no reduction in product payments earned during
these three (3) tax years shall be made unless product payments exceed
the aggregate of $6,865,262, which represents the amount of net operating
loss carryforwards expiring on June 30, 2001. For ATP's tax year ending
June 30, 2002, no reduction in product payments earned during this tax
year shall be made unless product payments exceed $1,938,997, which
represents the amount of net operating loss carryforwards expiring on
June 30, 2002.
Any product payment earned in excess of the aggregate of
$6,865,262 for the 1999, 2000 and 2001 tax years and in excess of
$1,983,997 for the 2002 tax year will be applied to the $4,400,000 until
such amounts aggregate $4,400,000. Beginning with the tax year ending
June 30, 2003, product payments in excess of $1,000,000 per year will not
be paid until any product payments made in the tax years ending June
1999, 2000, 2001 and 2002, that were in excess of ATP's original
agreements with PHA, if any, have been applied against any remaining
amount of the $4,400,000 and thereafter, if necessary, product payments
in excess of $1,000,000 per year will be reduced by fifty percent (50%)
until the aggregate of $4,400,000 is attained.
ATP has the right to receive product payments for other nicotine
product applications, if any, both pharmaceutical and non-pharmaceutical.
PHA is not obligated to develop or sell any products using the technology
developed by ATP.
ITEM 2. PROPERTIES
ATP does not own any tangible fixed assets.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
ATP has no outstanding legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK-HOLDER
MATTERS
a) Market Information
The Common Stock trades in the over-the-counter market
through the OTC Bulletin Board quotation system under the symbol "AVTH."
The following table sets forth the high and low bid price of ATP's Common
Stock reported for the fiscal periods indicated. Bid prices represent
prices between dealers, do not include retail markups, markdowns or
commissions, and may not represent actual transactions.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2000 1999 2000 1999 2000 1999 2000 1999
HIGH .97 1.25 .53 1.16 .38 .97 .28 .97
LOW .66 .72 .34 .69 .25 .63 .22 .66
b) Holders
There were approximately 1,850 shareholders of record of
ATP's Common Stock at September 30, 2000.
c) Dividends
ATP anticipates declaring and paying dividends from time
to time while substantial product payments are received from the sale of
products under ATP's agreements with PHA.
On September 21, 1998, ATP declared a dividend of $.07 per
share payable on January 6, 1999, to shareholders of record as of October
30, 1998.
On November 23, 1999, ATP declared a dividend of $.15 per
share payable on January 10, 2000, to shareholders of record as of
December 17, 1999. The $.15 per share dividend is based upon ATP's
earnings for fiscal 1999 and the transitional period July 1, 1998, to
September 30, 1998 (See "Change in Fiscal Year," Item 7).
On November 22, 2000, ATP declared a dividend of $.05 per
share payable on January 10, 2001, to shareholders of record as of
December 22, 2000. The $.05 per share dividend is based upon ATP's
earnings for fiscal year ended September 30, 2000.
<TABLE>
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth for the indicated periods selected historical financial information for
ATP. Such information is derived from the financial statements of ATP included under Item 8 and should
be read in conjunction with such financial statements, the related notes thereto and the information
included under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<CAPTION>
3 months Ended Year Ended
Year Ended June 30, September 30, September 30,
1996 1997 1998 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
Revenues -- 157,200 516,600 352,000 964,582 496,516
Net Income (loss) (14,957) 94,758 467,121 331,758 909,893 447,328
Net Income (loss) per
share of common stock
- basic (0.002) 0.01 0.06 0.04 0.11 0.05
Net Income (loss) per
share of common stock
- diluted (0.002) 0.01 0.06 0.04 0.11 0.05
Weighted average
number of shares of
common stock
outstanding - basic 7,831,588 8,051,094 8,092,136 8,092,136 8,092,136 8,173,010
Weighted average
number of shares of
common stock
outstanding - diluted 7,831,588 8,168,504 8,205,502 8,216,836 8,195,340 8,180,833
Cash provided by
(used in)operations (98,664) (51,211) 93,005 360,279 1,048,490 435,978
Increase (decrease)in
cash and cash
equivalents (1,472) (46,041) 52,554 356,791 241,579 (566,055)
Balance sheet data
to end of indicated
periods
Working capital 318,824 566,084 939,872 687,338 1,608,228 772,654
Total assets 1,484,998 1,600,488 2,063,651 2,411,756 2,750,124 2,022,345
Total stockholders'
equity 1,481,470 1,593,728 2,060,849 1,826,157 2,736,050 1,998,308
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
a) Change in Fiscal Year
Beginning with fiscal 1999, ATP changed its fiscal year
end from June 30 to September 30. Because ATP believes that the
results of its operations for the transitional quarter ending
September 30, 1998, were not generally affected, ATP believes its
fiscal years 1998, 1999 and 2000 are comparable. ATP has not changed
its tax year which remains with a June 30 year end.
b) Results of Operations
Operating revenues were $516,600, $964,582, and $496,516
for the twelve months ended June 30, 1998, September 30, 1999, and
2000, respectively.
All revenues resulted from the recognition of product
payments from PHA's sales of the Inhaler and the Patch. Product
payments generated by the Patch were $11,165, $15,369, and $11,693 in
fiscal 1998, 1999, and 2000, respectively.
General and administrative expenses
were $126,796, $151,091 and $140,735 in fiscal 1998, 1999, and 2000,
respectively.
Income from operations was $389,804, $813,491, and
$355,781 in fiscal 1998, 1999, and 2000, respectively. The variances
in income from operations from 1998 through 2000 were primarily due to
the variances in product payments from PHA's sales of the Inhaler.
ATP's net income for fiscal 2000 was $447,328, which included $91,547
of interest income.
b) Liquidity and Capital Resources
Cash and investments available on September 30, 2000,
were approximately $1,725,000. ATP believes that its cash and
investment resources are sufficient to meet its foreseeable needs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and other matters required by this
Item 8 are included on Pages F-1 and following.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Mr. James E. Turner, age 52, has been a Director of ATP since
November 1986. Mr. Turner was one of the founders and the Business
Manager of NCC Group, Ltd., a research and development limited
partnership which was a predecessor of ATP. Mr. Turner has been a
consultant to PHA for in excess of the last five years.
Mr. J. H. Uptmore, age 69, has been a Director of ATP since
August 1987. Mr. Uptmore has been the President and Chairman of the
Board of J. H. Uptmore & Associates, Inc., a construction contracting
and development company, since 1974.
Mr. J. W. Linehan, age 57, has been Director of ATP since June
1991, and President, Chief Executive Officer, Chief Financial Officer
and Secretary of ATP since July 1, 1990. Since August 1, 1995,
Mr. Linehan has been President and Chief Executive Officer of Linehan
Engineering, Inc., an independent engineering company wholly owned by
him.
Ms. Brenda Ray, age 51, has been a Director of ATP since March
1989. Ms. Ray assisted in the original research and development of
ATP's nicotine vapor inhalation technology. She is a consultant and
has been President of Brenda Ray, Inc. since 1985.
Mr. David A. Monroe, age 48, has been a Director of ATP since
March 1989. Mr. Monroe is President and CEO of The Telesis Group,
including PhotoTelesis Corporation, a government electronics
manufacturing company, and e-Watch, Inc., a commercial electronics
company. Mr. Monroe's prior experience includes Division General
Manager of Raytheon TI Systems, Inc., Founder & Chief Technical
Officer of Image Data Corporation, a communications technology
company, and Vice-President of Research & Development and Vice-President,
Product Line Manager, at Datapoint Corporation, a computer
equipment manufacturer.
ITEM 11. EXECUTIVE COMPENSATION
Cash Compensation
Mr. Linehan, President and Chief Executive Officer of ATP and
its sole executive officer, receives no salary or fees, but indirectly
benefits from payments made to Linehan Engineering, Inc. (See Item 13,
"Certain Relationships and Related Transactions"). Each Director is
entitled to receive travel expenses incurred by them in order to
attend Directors' meetings.
Compensation Pursuant to Plans
Nonqualified Stock Options
ATP has a nonqualified stock option plan authorizing the
granting by the board of directors of stock options covering common
stock to directors, officers, key management employees, independent
contractors providing services to ATP or consultants to ATP. The
exercise price per share cannot be less than 100 percent (or 110
percent in the case of stock options granted to holders of 10 percent
or more of the then outstanding common stock) of the fair market value
of ATP's common stock as determined by the board of directors on the
date the stock options are granted, and the exercise period for the
stock options cannot exceed 10 years from the date the stock options
are granted. Stock options are immediately exercisable, are not
transferable except by will or the laws of descent or distribution,
and expire within one year following termination of association with
ATP. The aggregate number of stock options outstanding as of
September 30, 1999, were 200,000, all exercisable at $.4375 per share.
During fiscal year 2000 options for 100,000 shares were exercised and
options for 100,000 shares expired. No options remain outstanding as
of September 30, 2000.
Summary of Option Transactions
The following table sets forth as to the directors of ATP the
stock options exercised during fiscal 2000. No options were granted
nor are any options outstanding at September 30, 2000.
Aggregated Options Exercised in Last Fiscal Year
Shares
Acquired or Value
Name Exercised Realized
J. H. Uptmore 100,000 $ 36,000
ITEM 12. COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information about the
Directors of ATP, which includes all persons known by ATP to own more
than 5% of the Common Stock as of November 30, 2000, and all officers
and Directors of ATP as a group as of September 30, 2000. Except as
indicated, ATP believes that each of the below named persons has sole
voting and investment power with respect to the shares shown and owns
the shares indicated beneficially and of record. All of the Common
Stock held by the persons described in the following table is
available for sale under Rule 144 of the Securities and Exchange
Commission.
Director Number Percent
Name Since of Shares of Class
Brenda Ray (1)
12544 Judson Road
San Antonio, TX 78233 1989 1,397,464 17.06%
James E. Turner
307 Wayside Drive
San Antonio, TX 78213 1986 370,221 4.52%
J. H. Uptmore (2)
P.O. Box 29389
San Antonio, TX 78229 1987 196,921 2.40%
David A. Monroe
7800 I.H. 10 W
San Antonio, TX 78230 1989 47,229 .58%
J.W. Linehan
16607 Blanco Road
Suite 1504
San Antonio, TX 78232 1991 85,000 1.04%
Officers and Directors
as a Group (5 persons) 2,0196,835 25.6%
____________________
(1) Includes 420,104 shares of Common Stock owned by the Jon Philip
Ray Family Trust of which Brenda Ray is a beneficiary.
(2) Includes 46,921 shares of Common Stock owned by J. H. Uptmore
& Associates, Inc., of which Mr. Uptmore is President and Chairman of the
Board.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires
ATP's directors, executive officers, and any persons holding more than
ten percent (10%) of ATP's Common Stock to report their initial ownership
of ATP's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission and to provide copies of such reports
to ATP. Based upon ATP's review of copies of such reports received by
ATP, ATP believes that during the year ended
September 30, 2000, all Section 16(a) filing requirements were satisfied
except for the inadvertent failure of Mr. Uptmore to report 100,000
shares received by him upon the exercise of a stock option on December
9, 1999; however, Mr. Uptmore filed the required Form 4 in December 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
Since August 1995, ATP has had an Administrative Services
Agreement with Linehan Engineering, Inc. ("LEI"), a related-party entity
owned by ATP's president. In 1998, 1999 and 2000, ATP paid LEI $37,540,
$36,000, and $39,780, respectively.
As of October 1, 2000, ATP entered into a Consulting Services
Agreement with James E. Turner, a director of ATP, under which Mr. Turner
agreed to act as a consultant of ATP until March 31, 2001, for a
consulting fee of $5,000 per month. In addition, Mr. Turner was granted
an option to purchase up to 100,000 shares of Common Stock, exercisable
as to 30,000 shares immediately and an additional 70,000 shares becoming
exercisable in the event of a business combination, or strategic alliance
presented by Mr. Turner and approved by the Board of Directors of ATP
prior to September 30, 2003. The options include an exercise price of
$0.2813 per share and exercisable options expire September 30, 2005.
In October 1996, ATP entered into a Consulting Services Agreement
with Brenda Ray, Inc. ("Ray"), a related-party entity owned by a director
of ATP. In 1998, 1999 and 2000, ATP paid Ray $12,000, $12,000, and
$12,000, respectively.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual
Report on Form 10-K:
1. Financial Statements and Independent Auditors' Report
The financial statements listed in the index to
Financial statements follows the signature page
of this report.
2. Financial Statement Schedules
ATP did not meet any of the requirements to provide
financial statement schedules for any of the
fiscal years ended 2000, 1999 or 1998.
3. Exhibits
The exhibits listed on the index to exhibits follows
the signature page of this report.
(b) ATP has not filed any Current Reports on Form 8-K since
the filing of ATP's last 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on behalf by the undersigned, there unto duly
authorized, in the City of San Antonio, State of Texas, as of December
22, 2000.
ADVANCED TOBACCO PRODUCTS, INC.
Date: December 22, 2000 By: /s/ J. W. Linehan
J. W. Linehan, President,
Chief Executive Officer and
Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Date: December 22, 2000 By: /s/ J. W. Linehan
J.W. Linehan, President,
Chief Executive Officer,
Chief Accounting Officer
and Director
Date: December 22, 2000 By: /s/ James E. Turner
James E. Turner, Director
Date: December 22, 2000 By:
J.H. Uptmore, Director
Date: December 22, 2000 By: /s/ Brenda Ray
Brenda Ray, Director
Date: December 22, 2000 By:
David A. Monroe, Director
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
Item 8. Financial Statements
The following financial statements are included in response to Item 14
(a):
Page
Index to Financial Statements F-1
Financial Statements
Report of Independent Public Accountants F-2
Balance Sheets - - September 30, 2000 and 1999 F-3
Statements of Income for the Years Ended
September 30, 2000 and 1999, for the Three
Month Period Ended September 30, 1998, and
for the Year Ended June 30, 1998 F-4
Statements of Stockholders' Equity for the Years
Ended September 30, 2000 and 1999, for the Three
Month Period Ended September 30, 1998, and for
the Year Ended June 30, 1998 F-5
Statements of Cash Flows for the Years Ended
September 30, 2000 and 1999, for the Three Month
Period Ended September 30, 1998, and for the Year
Ended June 30, 1998 F-6
Notes to Financial Statements F-7
F-1
ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Advanced Tobacco Products, Inc., d/b/a
Advanced Therapeutic Products, Inc.:
We have audited the accompanying balance sheets of Advanced Tobacco
Products, Inc. (a Texas corporation), d/b/a Advanced Therapeutic
Products, Inc., as of September 30, 2000 and 1999, and the related
statements of income, stockholders' equity and cash flows for the
years ended September 30, 2000 and 1999, the three-month period ended
September 30, 1998, and the year ended June 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Advanced
Tobacco Products, Inc. d/b/a Advanced Therapeutic Products, Inc. as of
September 30, 2000 and 1999, and the results of its operations and its
cash flows for the years ended September 30, 2000, and 1999, the
three-month period ended September 30, 1998, and the year ended June
30, 1998, in conformity with accounting principles generally accepted
in the United States.
San Antonio, Texas By: /s/ Arthur Andersen, LLP
November 22, 2000
F-2
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
BALANCE SHEETS SEPTEMBER 30, 2000 AND 1999
2000 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 123,746 $ 689,801
Payments receivable 107,792 140,078
Other receivables 0 1,587
Investments 565,153 790,836
Total current assets 796,691 1,622,302
LICENSE AGREEMENTS, less accumulated
amortization of $62,855 and
$46,995 as of 2000 and 1999,
respectively 189,856 174,443
INVESTMENTS 1,035,798 953,379
Total assets $ 2,022,345 $ 2,750,124
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accrued liabilities $ 24,037 $ 14,074
Total liabilities 24,037 14,074
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value;
500,000 shares authorized;
none issued
Common stock, $.01 par value;
30,000,000 shares authorized;
8,192,136 and 8,092,136 issued
and outstanding 81,922 80,922
Additional paid-in capital 12,587,628 12,544,878
Accumulated deficit (10,671,242) (9,889,750)
Total stockholders' equity 1,998,308 2,736,050
Total liabilities and
stockholders' equity $2,022,345 $2,750,124
The accompanying notes are an integral part
of these financial statements.
F-3
<PAGE>
<TABLE>
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENTS OF INCOME
<CAPTION>
For the year ended For the three-
September 30, month period ended For the year ended
2000 1999 September 30, 1998 June 30, 1998
<S> <C> <C> <C> <C>
REVENUES:
Product payments $ 496,516 $ 964,582 $ 352,000 $ 516,600
Total operating revenues $ 496,516 $ 964,582 $ 352,000 $ 516,600
EXPENSES:
General and administrative 140,735 151,091 40,866 126,796
Total operating expenses 140,735 151,091 40,866 126,796
INCOME FROM OPERATIONS 355,781 813,491 311,134 389,804
OTHER INCOME:
Interest income 91,547 96,402 20,624 77,317
Total other income 91,547 96,402 20,624 77,317
INCOME BEFORE INCOME TAXES 447,328 909,893 331,758 467,121
NET INCOME $ 447,328 $ 909,893 $ 331,758 $ 467,121
INCOME PER COMMON SHARE
- BASIC $ 0.05 $ 0.11 $ 0.04 $ 0.06
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING - BASIC 8,173,010 8,092,136 8,092,136 8,092,136
INCOME PER COMMON SHARE
- DILUTED $ 0.05 $ 0.11 $ 0.04 $ 0.06
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING DILUTED 8,180,833 8,195,340 8,216,836 8,205,502
CASH DIVIDENDS DECLARED PER
SHARE OF COMMON STOCK $ 0.15 $ -- $ 0.07 $ --
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
<TABLE>
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Additional
Common Stock Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1997 8,092,136 $ 80,922 $ 12,544,878 $ (11,032,072) $1,593,728
Net income -- -- -- 467,121 467,121
BALANCE, June 30, 1998 8,092,136 80,922 12,544,878 (10,564,951) 2,060,849
Net income -- -- -- 331,758 331,758
Dividends declared -- -- -- (566,450) (566,450)
BALANCE, September 30,
1998 8,092,136 80,922 12,544,878 (10,799,643) 1,826,157
Net income -- -- -- 909,893 909,893
BALANCE, September 30,
1999 8,092,136 80,922 12,544,878 (9,889,750) 2,736,050
Net income -- -- -- 447,328 447,328
Exercise of stock options 100,000 1,000 42,750 -- 43,750
Dividends declared -- -- -- (1,228,820) (1,228,820)
BALANCE, September 30,
2000 8,192,136 $ 81,922 $ 12,587,628 $ (10,671,242) $1,998,308
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<TABLE>
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
For year ended For the three-month
September 30, period ended For year ended
2000 1999 September 30, 1998 June 30, 1998
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 447,328 $ 909,893 $ 331,758 $ 467,121
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization of license agreements 15,860 6,680 1,670 6,680
Amortization of discount on
investments (71,046) (73,343) (21,551) (72,318)
(Increase) decrease in payments
receivable 32,286 211,922 32,059 (304,520)
(Increase) decrease in other
receivables 1,587 (1,587) -- --
Increase (decrease) in accrued
liabilities 9,963 (5,075) 16,343 (3,958)
Net cash provided by operating
activities 435,978 1,048,490 360,279 93,005
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of license agreements
and patent costs (31,273) (19,319) (3,488) (7,592)
Purchase of investments (585,690) (899,142) - (500,859)
Sale of investments 800,000 678,000 -- 468,000
Net cash provided by (used in)
investing activities 183,037 (240,461) (3,488) (40,451)
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock options 43,750 - -- --
Dividends paid (1,228,820) (566,450) -- --
Net cash used in financing activities (1,185,070) (566,450) -- --
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (566,055) 241,579 356,791 52,554
CASH AND CASH EQUIVALENTS,
beginning of year 689,801 448,222 91,431 38,877
CASH AND CASH EQUIVALENTS,
end of year $ 123,746 $ 689,801 $ 448,222 $ 91,431
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-6
ADVANCED TOBACCO PRODUCTS, INC.
d/b/a ADVANCED THERAPEUTIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Basis of Presentation
Advanced Tobacco Products, Inc. (a Texas Corporation), d/b/a Advanced
Therapeutic Products, Inc. ("ATP"), was formed in April 1983. Through
September
1987, ATP was engaged in the manufacturing and marketing of a product
based upon
nicotine technology. In 1987, ATP sold certain nicotine technology
and related
assets to what is now Pharmacia Corporation ("PHA"), a worldwide
pharmaceutical
company, for $3.6 million and the right to future product payments.
Revenue Recognition and Current Operations
The nicotine inhaler technology acquired from ATP
forms the
basis of the Nicotrol/Nicorette Inhaler ("Inhaler") developed by PHA for
use in
the nicotine replacement therapy market. Product payments from sales
of the
Inhaler, outside the U.S., are 3% of PHA's net sales to pharmacy
distributors.
Until June 30, 2000, payments from U.S. sales of the Inhaler were 9.9% of
PHA's net
sales to McNeil Consumer Health Care ("McNeil"), a Johnson & Johnson
Company,
which marketed the Inhaler to pharmacies. Effective July 1, 2000, PHA
reacquired,
from McNeil, the rights to market the Inhaler in the U.S. Payments
from the U.S.
sales of the Inhaler are now 3% of PHA's net sales. The agreement
with PHA
provides for quarterly product payments and includes a reduction
provision that
reduces the product payments in excess of $1 million per year by
fifty percent
until the aggregate of such reductions equal the sum of $4,400,000.
Effective
October 1999, the reduction provision was modified. For ATP's tax years
ending June
30, 1999, June 30, 2000 and June 30, 2001, no reduction in product
payments earned
during these three (3) tax years shall be made unless product payments
exceed the
aggregate of $6,865,262, which represents the amount of net operating
loss
carryforwards expiring on June 30, 2001. For ATP's tax year ending
June 30, 2002,
no reduction in product payments earned during this tax year shall be
made unless
product payments exceed $1,938,997, which represents the amount of
net operating
loss carryforwards expiring on June 30, 2002.
F-7
Any product payment earned in excess of the aggregate of $6,865,262
for the
1999, 2000 and 2001 tax years and in excess of $1,983,997 for the 2002
tax year
will be applied to the $4,400,000 until such amounts aggregate $4,400,000.
Beginning with the tax year ending June 30, 2003, product payments in excess
of
$1,000,000 per year will not be paid until any product payments made in the
tax
years ending June 1999, 2000, 2001 and 2002, that were in excess of ATP's
original
agreements with PHA, if any, have been applied against any remaining
amount of the
$4,400,000 and thereafter, if necessary, product payments in excess of
$1,000,000
per year will be reduced by fifty percent (50%) until the aggregate of
$4,400,000 is attained.
In addition, ATP has an agreement with PHA under which, among other
matters, ATP has the right to receive a royalty equal to .1% of net revenues
received by PHA from the sale of any product using a nicotine impermeable
copolymer
technology. Under the terms of the agreement, ATP receives royalties from
the
sales of PHA's Nicotrol/Nicorette Patch.
ATP also has an exclusive worldwide license to certain dry
powder nicotine inhaler technology from Duke University. ATP has obtained
several
patents covering this technology. ATP believes that a dry powder nicotine
inhaler has the potential to be a future generation nicotine replacement
product.
ATP recognizes revenues from PHA at the time PHA has sales of its
related
product. In December 1999, the Securities and Exchange Commission issued
Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements,"
which provides the Staff's views in applying generally accepted accounting
principles to selected revenue recognition issues. SAB No. 101 is required
to be
implemented no later than the fourth quarter of fiscal years beginning after
December 15, 1999. ATP has reviewed the guidance contained in SAB No.
101 and
believes that its current accounting policies and disclosures are
appropriate
and
address the requirements of SAB No. 101.
Concentration of Credit Risk
ATP's product payments and payments receivable are
derived
solely from PHA. ATP believes its associated exposure to credit risk is
minimal.
No allowance for doubtful accounts is considered necessary at
September 30, 2000
or 1999.
F-8
Fiscal Year Change
Effective September 1998, ATP changed its fiscal year ending
June 30 to
a
fiscal year ending September 30; however, ATP's tax year continues to end on
June 30. The three month transition period ended September 30, 1998,
bridges
the gap between ATP's old and new fiscal year ends. For comparative
purposes, ATP's unaudited statement of operations for the three month period
ended September 30, 1997, was as follows:
For the three months ended
September 30, 1997
(Unaudited)
REVENUES:
Product payments $ 20,656
Total operating revenues 20,656
EXPENSES:
General and administrative 45,700
Total operating expenses 45,700
LOSS FROM OPERATIONS (25,044)
OTHER INCOME:
Interest income 19,666
Total other income 19,666
LOSS BEFORE INCOME TAXES (5,378)
NET LOSS $ (5,378)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires ATP to make
estimates
and assumptions that affect the reported amounts of assets and
liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
Net Income Per Share
ATP adopted Statement of Financial Accounting Standards No. 128
(SFAS 128),
"Earnings per Share," in the first quarter of fiscal year 1998. SFAS 128
requires
presentation of basic earning per share and diluted earnings per share,
simplifies
computational guidelines, and increases the comparability of earnings per
share on
an international basis. Basic earnings per common share is based on the
weighted
average number of common shares outstanding during the respective years.
Diluted
earnings per share is based on the weighted average number of common shares
outstanding and dilutive common stock equivalents.
The following is a reconciliation of the denominators of the basic and
diluted per-share computations for net income:
Weighted average
Weighted average number of shares
number of shares Effect of of Common Stock
of Common Stock dilutive outstanding -
outstanding - Basic Stock Options Diluted
For the
year ended
September 30,
2000 8,173,010 7,823 8,180,833
For the
year ended
September 30,
1999 8,092,136 103,204 8,195,340
For three-month
period ended
September 30,
1998 8,092,136 124,700 8,216,836
For the
year ended
June 30, 1998 8,092,136 113,366 8,205,502
F-10
Statements of Cash Flows
For purposes of determining cash flows, ATP considers all
investments with
original maturities of less than three months to be cash equivalents.
Interest
paid during the years ended September 30, 2000 and 1999, and
June 30, 1998, and
during the three months ended September 30, 1998, was $303,
$ -0-, $ -0-, and $-0-,
respectively. Income taxes paid during the years ended
September 30, 2000 and
1999, and June 30, 1998, and during the three-months ended
September 30, 1998, was
$ -0-, $ -0-,$-0-, and $1,233, respectively.
License Agreement
In fiscal year 1993, ATP entered into a license agreement for nicotine
technology with Duke University. The term of the license agreement
is for any
period such nicotine technology is under patent. ATP capitalized the
direct costs
incurred in obtaining the license agreement plus patent prosecution
costs. These
costs are being amortized on a straight-line basis over 20 years.
Stock-Based Compensation
ATP accounts for its employee stock compensation plans
using the "intrinsic
value" method of accounting set forth in Accounting Principles
Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and
related
interpretations. Accordingly, compensation cost for stock options
is measured as
the excess, if any, of the quoted market price of ATP's common stock at
the date
of the grant over the amount an employee must pay to acquire the stock.
Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based
Compensation," encourages, but does not require companies to
measure
and recognize in their financial statements a compensation cost for
stock-based
employee compensation plans based on the "fair value" method of
accounting set
forth in the statement.
F-11
Investments in Securities
ATP accounts for investments in debt securities as "held-to-maturity,"
as
set forth in SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity
Securities." These securities are stated in the accompanying
financial statements
at historical cost plus related accretion (for U.S. Treasury Bonds).
Debt
securities with a maturity of less than one year are classified in the
balance
sheet as current assets, while debt securities with a maturity of greater
than one
year are classified as long-term assets.
2. INVESTMENTS:
ATP's investments consist of U.S. Treasury zero coupon bonds
which were
purchased at a discount from their face value and are carried at
historical cost
plus accretion, which as of September 30, 2000 and 1999,
approximates their fair
market value, and certificates of deposit. At September 30, 2000, ATP
intends to
hold all investments to their respective maturities, which range from
November
2000, to May 2003.
Investments classified as current assets at September 30, 2000,
include
the following:
Cost Fair Value
United States Treasury Bonds $ 465,153 $ 463,609
Certificates of Deposit 100,000 100,000
$ 565,153 $ 563,609
Investments classified as long-term assets at September 30, 2000,
include
the following:
Cost Fair Value
United States Treasury Bonds $ 1,035,798 $1,030,529
The difference between cost and fair value for the investments
discussed
above represent unrealized holding gains and losses. Fair value
was obtained from
the Company's securities broker.
F-12
Investments classified as current assets at September 30, 1999,
include the
following:
Cost Fair Value
United States Treasury Bonds $ 590,836 $ 588,759
Certificates of Deposit 200,000 200,000
$ 790,836 $ 788,759
Investments securities classified as long-term assets at
September 30, 1999,
include the following:
Cost Fair Value
Unites States Treasury Bonds $ 953,379 $ 937,448
The difference between cost and fair value for the investments
discussed
above represent unrealized holding gains and losses. Fair value was
obtained from
the Company's securities broker.
3. FEDERAL INCOME TAXES:
As of September 30, 2000, ATP has remaining tax net operating
loss and tax
credit carryforwards of approximately $8,440,000 and $1,000,
respectively, which
may be used to reduce taxes against future earnings. The net
operating loss
carryforwards expire between 2001 and 2011, while the tax credit
carryforwards
expire in 2001. Net operating loss carryforwards expire as follows:
$5,271,988
($6,865,262 less $455,410 used for the tax year ending June 30, 2000
and less
$1,137,864 used for the tax year ending June 30, 1999) on
June 30, 2001, $1,938,997
on June 30, 2002, $988,839 on June 30, 2003, $118,883 on
June 30, 2004, $91,380 on
June 30, 2005, and $34,107 on June 30, 2011. Given the net operating
loss history
of ATP, except in recent years, ATP believes that the deferred assets
will not be
realized and, accordingly, a variation allowance equivalent to the
deferred tax
assets has been established. ATP will reevaluate the necessity for
such valuation
allowance in the future.
F-13
The tax effects of the various loss and credit carryforwards are as
follows:
September 30,
2000 1999
Deferred income tax
assets -
Net operating loss
carryforwards $ 2,870,000 $ 3,026,000
Tax credit
carryforwards 1,000 48,000
Total gross deferred
tax assets 2,871,000 3,074,000
Less - Valuation
allowance (2,871,000) (3,074,000)
Net deferred tax
assets $ -- $ --
4. NONQUALIFIED STOCK OPTION PLAN:
ATP has a nonqualified stock option plan authorizing the granting
by the
board of directors of stock options to officers, key management
employees,
independent contractors providing services to ATP or consultants of ATP.
The exercise price per share cannot be less than 100 percent (or 110
percent in the case of stock options granted to holders of 10 percent or
more of
the then outstanding common stock) of the fair market value of ATP's
common
stock on the date the stock options are granted and the exercise period
for the
stock options cannot exceed 10 years from the date the stock options are
granted. Stock options are immediately exercisable, are not transferable
except
by will or the laws of descent or distribution, and expire within one year
following termination of association with ATP. The following table
summarizes the activity in the Company's stock option plan:
F-14
Weighted Average
Stock Exercise
Options Price Per Share
Outstanding at
September 30, 1999
and 1998, and
June 30, 1998 200,000 $.4375
Exercised 100,000 $.4375
Expired 100,000 $.4375
Outstanding at
September 30, 2000 --0 --0
On December 9, 1999, J. H. Uptmore exercised 100,000 stock options at
$.4375 per share. Also, on September 27, 2000, D. A. Monroe's 100,000 stock
options expired.
5. RELATED-PARTY TRANSACTIONS:
Since August 1995, ATP has had an administrative services agreement
with
Linehan Engineering, Inc. ("LEI"), a related-party entity owned by ATP's
president. During the years ended September 30, 2000 and 1999, the
three months
ended September 30, 1998, and the year ended June 30, 1998, ATP paid LEI
$39,780, $36,000, $10,800, and $37,540, respectively, for administrative
services.
In October 1996, ATP entered into a consulting services agreement with
Brenda Ray, Inc. ("Ray"), a related-party entity owned by a director of ATP.
During the years ended September 30, 2000 and 1999, the three months ended
September 30, 1998, and the year ended June 30, 1998, ATP paid Ray $12,000,
$12,000, $3,000, and $12,000, respectively, for consulting services.
6. UNAUDITED QUARTERLY FINANCIAL DATA:
2000 First Qtr Second Qtr Third Qtr Fourth Qtr
Operating Revenues $ 91,863 $ 182,153 $ 114,708 $ 107,792
Operating Income 48,715 150,592 86,263 70,211
Net Income 80,176 168,742 110,343 88,067
Basic and diluted 0.01 0.02 0.01 0.01
income per share
F-15
1999 First Qtr Second Qtr Third Qtr Fourth Qtr
Operating Revenues $ 317,900 $ 236,281 $ 304,250 $ 106,151
Operating Income 271,740 204,834 265,753 71,164
Net Income 299,080 224,707 288,629 97,477
Basic and diluted 0.04 0.03 0.04 0.01
income per share
7. SUBSEQUENT EVENTS:
As of October 1, 2000, ATP entered into a Consulting Services
Agreement
with James E. Turner, a director of ATP, under which Mr. Turner
agreed to act as
a consultant of ATP until March 31, 2001, for a consulting fee of
$5,000 per
month. In addition, Mr. Turner was granted an option to purchase
up to 100,000
shares of Common Stock, exercisable as to 30,000 shares
immediately and an
additional 70,000 shares becoming exercisable in the event of a
business
combination, or strategic alliance presented by Mr. Turner and
approved by the
board of directors of ATP prior to September 30, 2003. The options
include an
exercise price of $0.2813 per share and exercisable options expire
September 30,
2005.
On November 22, 2000, ATP declared a dividend of $.05 per share
payable on
January 10, 2001, to stockholders of record as of December 22, 2000.
The $.05 per
share dividend is based upon ATP's earnings for fiscal year ended
September 30,
2000.
Effective November 22, 2000, ATP authorized the renewal of both the
administrative services agreement with LEI and the consulting services
agreement
with Ray until December 21, 2001.
F-16
ADVANCED TOBACCO PRODUCTS, INC.
INDEX TO EXHIBITS
Item 14(a)
Exhibit No. Description
1 Form of Agreement Among Underwriters, including Underwriting
Agreement and Selected Dealers Agreement, incorporated by
reference to Exhibit 1 of Registrant's Statement on Form S-1
(Registration No. 2-88812, as amended on May 23, 1984), the
effective date thereof hereinafter, the "Registrant's
Registration Statement."
2 Agreement to Raise Capital and Acquire Technology, dated
September 19, 1983, between the Registrant and NCC Group,
Ltd.,
by reference to Exhibit 2 of the Registrant's Registration
Statement.
3.1 Restated Articles of Incorporation of the Registrant, by
reference to Exhibit 3.1 of the Registrant's Registration
Statement.
3.2 Bylaws of the Registrant, by reference to Exhibit 3.2 of
the Registrant's Registration Statement.
4.1 Specimen Common Stock Certificate, by reference to
Exhibit 4.1
of the Registrant's Registration Statement.
4.2 Specimen of Warrant Certificate, by reference to Exhibit
4.2 of the Registrant's Registration Statement.
4.3 Warrant Agreement between Registrant and Frost National
Bank, as Warrant Agent, by reference to Exhibit 4.3 of the
Registrant's Registration Statement.
4.4 Articles Four, Nine and Ten of the Articles of Incorporation
of the Registrant (included in Exhibit 3.1), by reference to
Exhibit 4.4 of the Registrant's Registration Statement.
4.5 Form of Warrant Agreement and Representative Unit Purchase
Warrant, by reference to Exhibit 4.5 of the Registrant's
Registration Statement.
5.1 Opinion of Matthews & Branscomb regarding legality of
securities,
by reference to Exhibit 5.1 of the Registrant's Registration
Statement.
5.2 Opinion of Matthews & Branscomb regarding FDA and other
governmental regulation, by reference to Exhibit 5.2 of the
Registrant's Registration Statement.
10.1 Acquisition Agreement between the Registrant and NCC
Group, Ltd. (previously filed as part of Exhibit 2), by
reference to Exhibit 10.1 of the Registrant's Registration
Statement.
10.2 Agreement dated October 31, 1983, between the Registrant
and The Richards Group, Inc., of Dallas, Texas, by reference
to
Exhibit 10.2 of the Registrant's Registration Statement.
10.3 Commitment Letter dated January 9, 1984, from American
Filtrona Company (equipment supplier), by reference to
Exhibit
10.3 of the Registrant's Registration Statement.
10.4 Commitment Letter dated January 6, 1984, from Raynor
Adams & Associates, Inc. (equipment supplier), by
reference to
Exhibit 10.4 of the Registrant's Registration Statement.
10.5 Commitment Letter dated June 20, 1983, from Harvey
Machine Company, Inc. (equipment supplier), by reference to
Exhibit 10.5 of the Registrant's Registration Statement.
10.6 Commitment Letter dated January 9, 1984, from J. H.
Uptmore & Associates, Inc. (lease space improvements), by
reference to Exhibit 10.6 of the Registrant's Registration
Statement.
10.7 Advanced Tobacco Products, Inc. 1984 Incentive Stock
Option Plan, by reference to Exhibit 10.7 of the
Registrant's Registration Statement.
10.8 Form of Option Agreement under 1984 Advanced Tobacco
Products, Inc. Incentive Stock Option Plan, by reference to
Exhibit 10.8 of the Registrant's Registration Statement.
10.9 S.A. Vend, Inc. 1983 Incentive Stock Option Plan, by
reference to Exhibit 10.9 of the Registrant's
Registration Statement.
10.10 Employment Agreement dated December 7, 1983, between
the Registrant and Gerald R. Mazur, by reference to Exhibit
10.10 of the Registrant's Registration Statement.
10.11 Employment Agreement dated December 7, 1983, between
the Registrant and J. P. Ray, by reference to Exhibit 10.11
of the Registrant's Registration Statement.
10.12 Employment Agreement dated August 1, 1983, between the
Registrant and Edmund G. Vimond, Jr., by reference to
Exhibit 10.12 of the Registrant's Registration Statement.
10.13 Employment Agreement dated November 27, 1983, between
the Registrant and James D. Simonsen, by reference to
Exhibit 10.13 of the Registrant's Registration Statement.
10.14 Patent Purchase Agreement, dated May 27, 1987, between
Advanced Tobacco Products, Inc. and Pharmacia LEO, Inc.,
and filed as an exhibit to the Form 8-K filed on or about
July 29, 1987.
10.15 Asset Purchase Agreement between Advanced Tobacco
Products, Inc.
and Pharmacia LEO, Inc., executed as of June 1, 1987, and
filed as an exhibit to the Form 8-K filed on or about
July 29, 1987.
10.16 Consultation Agreement between Advanced Tobacco
Products, Inc.
and Pharmacia LEO, Inc., filed as an exhibit to the
Registrant's
1987 Form 10-K.
10.17 First Amendment to Patent Purchase Agreement, dated as
of November 22, 1990, between the Registrant and AB LEO, a
Swedish corporation, and filed as an exhibit to the Form 8-K,
dated December 12, 1990.
10.18 Second Amendment to Asset Purchase Agreement, dated as
of November 20, 1990, between the Registrant and
Pharmacia LEO,
a New Jersey corporation, and filed as an exhibit to the
Form 8-K, dated December 12, 1990.
16.1 Letter regarding change in Certifying Accountant, filed
as an exhibit to the Form 8-K, dated October 3, 1990.
16.2 Letter regarding change in Certifying Accountant, filed
as an exhibit to the Form 8, Amendment No. 1, dated
December 12, 1991.
16.3 Current Report on Form 8-K regarding the Registrant's
disclosure of its intention to change its fiscal year end
from
June 30 to September 30, beginning the fiscal year ending
September 30, 1999.
23.1 Consent of Independent Public Accountants, filed as an
exhibit to the Form 10-K, dated December 27, 1999.
23.2 Consent of Independent Public Accountants, filed as an
exhibit to this Form 10-K, dated December 20, 2000.
ARTHUR ANDERSEN
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the
incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-15694.
By: /s/ Arthur Andersen, LLP
Arthur Andersen
San Antonio, Texas
December 20, 2000
