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 March 31, 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)
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:
8,192,136 as of March 31, 2000
ADVANCED TOBACCO PRODUCTS, INC. PART I - FINANCIAL INFORMATION
dba ADVANCED THERAPEUTIC ITEM 1: Financial Statements
PRODUCTS, INC.
BALANCE SHEETS
(Unaudited) (Audited)
March 31 September 30
2000 1999
ASSETS:
CURRENT ASSETS:
Cash & cash equivalents $ 40,277 $ 689,801
Investments 491,351 790,836
Royalties Receivable 171,682 140,078
Other Receivables -0- 1,587
Total current assets: $ 703,310 $1,622,302
LICENSE AGREEMENTS, Net: 166,513 174,443
INVESTMENTS: 935,037 953,379
TOTAL ASSETS: $1,804,860 $2,750,124
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Accounts payable $ 4,961 $ 14,074
TOTAL LIABILITIES: 4,961 14,074
SHAREHOLDERS' 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 March 31, 2000, and
September 30,1999 respectfully 81,922 80,922
Additional paid-in-capital 12,587,628 12,544,878
Accumulated deficit (10,869,651) (9,889,750)
TOTAL STOCKHOLDERS' EQUITY: 1,799,899 2,736,050
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $1,804,860 $2,750,124
<PAGE>
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF INCOME (LOSS)
(Unaudited)
Three Months Ended March 31
2000 1999
REVENUES:
Royalty Income, Net $ 182,153 $ 236,281
Total operating revenues: 182,153 236,281
EXPENSES:
General and administrative 31,561 31,447
Total operating expenses: 31,561 31,447
INCOME FROM OPERATIONS: 150,592 204,834
OTHER INCOME:
Interest Income 18,150 19,873
Total other income: 18,150 19,873
NET INCOME: $ 168,742 $ 224,707
WEIGHTED AVERAGED NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING: 8,192,136 8,092,136
WEIGHTED AVERAGED NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING -
ASSUMING DILUTION: 8,195,624 8,208,730
INCOME PER COMMON SHARE - BASIC AND
ASSUMING DILUTION $ .02 $ .03
<PAGE>
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF INCOME (LOSS)
(Unaudited)
Six Months Ended March 31
2000 1999
REVENUES:
Royalty Income, Net $274,016 $554,181
Total operating revenues: 274,016 554,181
EXPENSES:
General and administrative 74,709 77,607
Total operating expenses: 74,709 77,607
INCOME (LOSS) FROM OPERATIONS: 199,307 476,574
OTHER INCOME:
Interest Income 49,612 47,213
Total other income: 49,612 47,213
NET INCOME: $248,919 $523,787
WEIGHTED AVERAGED NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING: 8,104,533 8,092,136
WEIGHTED AVERAGED NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING -
ASSUMING DILUTION: 8,149,953 8,206,066
INCOME PER COMMON SHARE - BASIC AND
ASSUMING DILUTION $ .03 $ .06
<PAGE>
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended March 31
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income: $248,919 $523,787
Adjustments to reconcile net
income to net cash provided by
operating activities:
Amortization of license agreements 7,930 3,340
Amortization of discount on investments(33,580) (35,989)
Increase in cash flows from changes
in operating assets and liabilities
Accrued royalties -0- 117,670
Royalties receivable (30,017) (22,178)
Accounts payable (9,113) (4,209)
Net cash provided by operating
activities: 184,139 (582,421)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of license agreements and
patent expenses -0- (5,614)
Purchase of investments (148,593) (499,359)
Sale of investments 500,000 278,000
Net cash used in investing
activities: 351,407 (226,973)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of Stock Options 43,750 -0-
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: (649,524) (211,002)
CASH & CASH EQUIVALENTS AT
BEGINNING OF PERIOD: 689,801 449,481
CASH & CASH EQUIVALENTS AT
END OF PERIOD: $ 40,277 $238,479
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 Corporation("PHA") in exchange for
product payments. Product payments from the non U.S. sales of the
Inhaler are 3% of PHA's net sales to pharmacy distributors.
Product payments from the sales of the Inhaler in the U.S. are 9.9%
of PHA'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 are not disclosed, as is the case with regard to
McNeil, net sales are determined by multiplying the net sales of
PHA to McNeil by 3.3 (in effect, 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. 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. PHA 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 PHA 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 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 now receives royalties from the
sales of PHA's Nicorette(r)/Nicotrol(r) Patch.
LIQUIDITY AND CAPITAL RESOURCES
Cash resources, including investments, available on March 31, 2000,
were approximately $1,467,000, as compared to approximately
$1,944,000 as of March 31, 1999. 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 six month period ending March 31, 2000,
decreased to $274,016, as compared to $554,181 for the six month
period ending March 31, 1999. This decrease is due to a
decrease in Inhaler product payments from PHA.
Interest income for the six month period ending March 31, 2000,
increased to $49,612, as compared to $47,213 for the six month
period ending March 31, 1999. This increase is primarily due to
minor variations in interest earned on investments.
Net income for the six month period ending March 31, 2000,
decreased to $248,919, as compared to $523,787 for the six month
period ending March 31, 1999. This decrease is due to a decrease
in Inhaler Product payments from PHA.
General and administrative expenses for the six month period ending
March 31, 2000, decreased to $74,709, as compared to $77,607 for
the six month period ending March 31, 1999. 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: May 15, 2000
By:/s/ J. W. Linehan
J.W. Linehan, Chief
Executive Officer and
Chief Accounting Officer
9
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