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, 1999
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, 1999
ADVANCED TOBACCO PRODUCTS, INC. PART I - FINANCIAL INFORMATION
dba ADVANCED THERAPEUTIC ITEM 1: Financial Statements
PRODUCTS, INC.
BALANCE SHEETS
(Unaudited) (Audited)
December 31 September 30
1999 1999
ASSETS:
CURRENT ASSETS:
Cash & cash equivalents $1,203,967 $ 689,801
Investments 486,966 790,836
Royalties Receivable 231,941 140,078
Other Receivables -0- 1,587
Total current assets: $1,922,874 $1,622,302
LICENSE AGREEMENTS, Net: 170,478 174,443
INVESTMENTS: 774,692 953,379
TOTAL ASSETS: $2,868,044 $2,750,124
LIABILITIES AND SHAREHOLDERS'
EQUITY:
LIABILITIES:
Accounts payable $ 8,068 $ 14,074
TOTAL LIABILITIES: 8,068 14,074
SHAREHOLDER'S EQUITY:
Common stock, $.01 par value;
30,000,000 shares authorized;
8,192,136 shares and 8,092,136
shares issued and outstanding
as of December 31, 1999, and
September 30, 1999, respectfully 81,922 80,922
Additional paid-in-capital 12,587,628 12,544,878
Accumulated deficit (9,809,574) (9,889,750)
TOTAL STOCKHOLDERS' EQUITY: 2,859,976 2,736,050
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $2,868,044 $2,750,124
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF INCOME (LOSS)
(Unaudited)
Three Months Ended December 31
1999 1998
REVENUES:
Royalty Income, Net $ 91,863 $ 317,900
Total operating revenues: 91,863 317,900
EXPENSES:
General and administrative 43,148 46,160
Total operating expenses: 43,148 46,160
INCOME FROM OPERATIONS: 48,715 271,740
OTHER INCOME:
Interest Income 31,461 27,340
Total other income: 31,461 27,340
NET INCOME: $ 80,176 $ 299,080
WEIGHTED AVERAGED NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING: 8,115,946 8,092,136
WEIGHTED AVERAGED NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING - ASSUMING DILUTION: 8,183,627 8,202,880
INCOME PER COMMON SHARE -
BASIC AND ASSUMING DILUTION $ .01 $ .04
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC
PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended December 31
1999 1998
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income: $ 80,176 $ 299,080
Adjustments to reconcile net
income to net cash provided
by operating activities:
Amortization 3,965 1,670
Amortization of discount on
investments (15,856) (19,087)
Increase in cash flows from
changes in operating assets
and liabilities
Royalties receivable (91,863) (317,900)
Accounts payable (6,006) (3,535)
Net cash used by operations: (29,584) (39,772)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of license agreements and
patent expenses -0- (588)
Purchase of investments -0- -0-
Sale of investments 500,000 278,000
Net cash provided (used) by
investments: 500,000 277,412
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of Stock Options 43,750 -0-
Net cash provided by financing: 43,750 -0-
NET INCREASE IN CASH AND CASH
EQUIVALENTS: 514,166 237,640
CASH & CASH EQUIVALENTS AT BEGINNING
OF PERIOD: 689,801 449,481
CASH & CASH EQUIVALENTS AT END
OF PERIOD: $1,203,967 $687,121
NOTES TO FINANCIAL STATEMENTS
The condensed financial statements included herein have been
prepared by Advanced Tobacco Products, Inc., dba Advanced
Therapeutic Products, Inc. ("ATP") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
However, all adjustments have been made to the accompanying
financial statements which are, in the opinion of ATP's
management, necessary for the fair presentation of ATP's results
of operations for the period covered. Certain information and
footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although ATP believes that the
disclosures are adequate to make the information presented herein
not misleading. These condensed financial statements should be
read in conjunction with the financial statements and notes
thereto included in ATP's Annual Report on Form 10-K as of
September 30, 1999.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operation
RESULTS OF OPERATIONS
In 1987, ATP sold patented nicotine technology, which forms the
basis of the Nicorette(r)/Nicotrol(r) Inhaler ("Inhaler"), to
what is now known as Pharmacia & Upjohn; Inc. ("PNU") in exchange
for product payments. Product payments from the non U.S. sales
of the Inhaler are 3% of PNU's net sales to pharmacy
distributors. Product payments from the sales of the Inhaler in
the U.S. are 9.9% of PNU's net sales to McNeil Consumer Health
Care("McNeil"), a Johnson & Johnson Company, which markets the
Inhaler to pharmacies.
Product payments are payable on a country by country basis for
the greater of 10 years following the date of the first
commercial sale or the expiration of all issued patents
enforceable in such countries. If the net sales to pharmacy
distributors cannot be obtained or is not disclosed, as is the
case with regard to McNeil, net sales are determined by
multiplying the net sales of PNU to McNeil by 3.3 (in effect,
9.9% of PNU's sales to McNeil). There are product payment
limitations in the event of the sale of a nicotine vapor product
competitive with the Inhaler. There are product payment
limitations when product payment calculations exceed certain
ceilings as more completely described in ATP's Annual Report on
Form 10-K as of September 30, 1999.
McNeil launched the Inhaler nationwide in the U.S. as a
prescription product in September 1998. PNU has introduced the
Inhaler, primarily as an over-the-counter product, in the United
Kingdom, Mexico, Australia, Norway, Sweden, Denmark, Italy,
Austria, The Netherlands, Belgium, Finland, Iceland, Gibraltar,
New Zealand, Ireland and Hong Kong. ATP understands that
additional country launches are planned by PNU to occur as
regulatory approvals are granted.
The Inhaler is the first and only form of nicotine replacement
therapy ("NRT") 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.
In September 1992, ATP obtained 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 NRT.
Effective as of October 1993, ATP has an agreement with PNU under
which, among other matters, ATP has the right to receive a
royalty equal to .1% of net revenues received by PNU from the
sale of any product using a nicotine impermeable copolymer
technology. Under the terms of the agreement, ATP now receives
royalties from the sales of the Nicorette(r)/Nicotrol(r) Patch by
PNU.
LIQUIDITY AND CAPITAL RESOURCES
Cash resources, including investments, available on December 31,
1999, were approximately $2,470,000 as compared to approximately
$1,880,000 as of December 31, 1998. On January 10, 2000, ATP
paid dividends aggregating $1,228,820, or 15 cents per share.
COMPARISON OF SELECTED FINANCIAL DATA
Operating Revenues for the three month period ending December 31,
1999, decreased to $91,863, as compared to $317,900 for the three
month period ending December 31, 1998. This decrease is due to a
decrease in product payments from PNU for the Inhaler.
Interest income for the three month period ending December 31,
1999, increased to $31,461, as compared to $27,340 for the three
month period ending December 31, 1998. This increase is
primarily due to an increase in cash resources available to ATP.
Net income for the three month period ending December 31, 1999,
decreased to $80,176, as compared to $299,080 for the three month
period ending December 31, 1998. This decrease is due to a
decrease in product payments from PNU for the Inhaler.
General and administrative expenses for the three month period
ending December 31, 1999, decreased to $43,148, as compared to
$46,160 for the three month period ending December 31, 1998.
This decrease is primarily due to minor variations in
administrative costs.
PART II - OTHER INFORMATION
Item 1: Legal Proceedings. None
Item 2: Changes in Securities and Use of Proceeds. 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
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 11, 2000
By:/s/ J.W.. Linehan
J.W. Linehan, Executive
Officer and Chief Accounting
Officer
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