<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1998
-------------------------------------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
------------------ --------------------------
Commission file number 0-15324
---------------------------------------------------------
Eye Technology, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 52-1402131
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16 South Market Street, Petersburg, Virginia 23803
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(804) 861-0681
- -------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the past 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:
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 9,669,740 shares of Common
Stock, $.01 par value, outstanding as of September 1, 1998
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ ]
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
An index to the financial statements of the Company filed as a part of this
report appears at Page F-1. The financial statements of the Company appear at
Pages F-2 through F-7 of this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Financial Condition. On February 6, 1998, the Company acquired all of the
capital stock of Star Tobacco and Pharmaceuticals, Inc. ("Star") in
consideration for the issue to Star's stockholders of stock which equaled
approximately 90% of the total issued and outstanding capital stock of the
Company after the transaction. As specified by "reverse acquisition" accounting
rules (See Note B to the financial statements filed as a part of this Report),
the condensed consolidated balance sheet of the Company at March 31, 1998,
includes by consolidation Eye Technology, Inc., and all of its subsidiaries
including Star, whereas the balance sheet at December 31, 1997, is the balance
sheet of Star only.
The Company's balance sheet at March 31, 1998, reflects an illiquid
position with a current asset-to-liability ratio of 1 - 2.02. Operations at Star
have been financed over the past several years primarily through increases in
accounts payable, accrued expenses and borrowed funds from institutional
lenders. During the first quarter ended March 31, 1998, and subsequent to the
"reverse acquisition" transaction of February 6, 1998, described above, the
Company received $1.45 million through the private sale of 2.9 million shares of
Common Stock of the Company.
Star maintains with a bank a revolving line of credit pursuant to which
borrowings of up to $1.5 million are available to the Company with advances
being limited by formula to specified levels of accounts receivable and
inventory. This credit facility expired on March 31, 1998, but was extended to
April 30, 1998, and again to May 31, 1998. The Company is in default of certain
financial covenants with this lender, a situation which has existed for over two
years. The Company is currently negotiating with unrelated investors with
respect to equity investments in the Company of not less than five million
dollars. The Company expects to close one or more of these investments prior to
June 30, 1998, and perhaps prior to May 31, 1998. In the event the Company does
not receive these anticipated equity funds by May 31, 1998, the Company believes
that its bank lender will extend its existing line of credit to June 30, 1998.
The Company intends to retire its existing bank indebtedness upon receipt of the
anticipated equity financing, but there can be no assurances that it will
receive such financing. There also can be no assurances that the existing line
of credit would be extended beyond June 30, 1998, or that alternative debt or
equity financing from third parties would be available. The Company's major
shareholders have indicated, however, that they would supply debt or equity
financing in the event such financing were not timely available from unrelated
third parties.
The significant increase in inventories at March 31, 1998, compared to
December 31, 1997, reflects primarily the inclusion of inventories of over
$800,000 maintained by Eye Technology, Inc. ("ETI"). The Company has begun
preliminary discussions with third parties regarding a sale of assets related to
the intraocular lens business of ETI. In the event of such a sale, the Company
does not expect that there would be any significant financial gain or loss to
the Company.
The significant increase in "intangibles" reflects primarily the
recording of $764,000 of goodwill incurred in the "reverse acquisition"
transaction described above. This item is being amortized over a five-year
period at the rate of $153,000 per year, or $38,250 per quarter.
In March 1998, 2,320 shares of Class A Preferred Stock (listed as
"Redeemable preferred stock" on the balance sheet) were converted into 232,000
shares of Common Stock of the Company, i.e., at the rate of 100 shares of Common
Stock for each share of Preferred Stock. Each holder of Preferred Stock had the
2
<PAGE> 3
current right to redeem the shares for cash or to be converted to Common Stock
at the rate of 80 shares of Common Stock for each share of Preferred Stock. The
Company offered each holder to convert at the 100-to-1 ratio rather than the
80-to-1 ratio, and the holders of all but 250 shares of Preferred Stock accepted
the Company's offer.
Results of Operations. Results for the first quarter of 1998 include the results
of operations of the Company's ETI division for the months of February and March
1998, whereas results of operations shown for the first quarter of 1997 include
only those of Star.
Net sales declined by slightly more than 50% from the first quarter of
1997 to the first quarter of 1998, which includes $128,000 from the sale of
intraocular lenses by the Company's ETI division. Sales of cigarettes and small
cigars by the Company's tobacco products division, Star, declined by more than
52%. This decline is attributable to: (i) the loss of contract manufacturing
business, primarily sales to Swisher International, Inc. for the manufacture of
small cigars, which declined from $1,550,000 in the first quarter of 1997 to
$17,000 in the first quarter of 1998; and (ii) declining sales of Star brand
cigarettes due to the reallocation of financial resources throughout 1997 and
1998 to date from marketing, selling and promotional expenses to research and
development expenses devoted to tobacco processing and the development of new
products containing tobacco which is free of tobacco-specific nitrosamines. Net
sales in the 1998 first quarter include $247,000 from the sale of a
tobacco-flavored, non-nicotine chewing gum, first introduced to the market in
the 1998 first quarter.
Excise taxes, as a percentage of sales, increased from 35% in the 1997
first quarter to 40% in the 1998 first quarter. This change can be attributed to
the fact that tobacco excise taxes are not payable by the Company on its sales
of little cigars to Swisher International.
Costs of goods sold ("COGS") remained relatively stable, as a
percentage of sales, from 1997 first quarter to 1998 first quarter. Tobacco and
gum COGS of approximately 48% in the first quarter of 1998 were only slightly
adversely affected by COGS of 80% in the Company's ETI division.
Gross profit margin was 11% in the first quarter of 1998 compared to
15% in the first quarter of 1997. The decline is due primarily to the impact of
the increase in excise taxes calculated as a percentage of sales.
Marketing and distribution expenses, as a percentage of sales, doubled
from 1997's first quarter to the same quarter of 1998. The percentage increase
is attributable to the effect of overhead costs, which become a larger
percentage of sales as sales decline, and to expenses incurred in the
introduction of the Company's gum product in the first quarter of 1998.
General and administrative costs declined by approximately 10% from
first quarter 1997 to first quarter 1998, but increased as a percentage of sales
from 7% to 13%. The percentage increase is due to the following factors: (i)
overhead costs increase as a percentage against a declining sales volume; (ii) a
portion of general and administrative costs is related to research and
development activities of the Company, from which no revenues have been derived,
and which did not decline in the two periods being compared; (iii) an increase
in accounting costs were incurred as a result of the "reverse acquisition"
transaction described in "Financial Condition" above and as a result of the
Company's efforts to file delinquent financial reports required by the
Securities and Exchange Commission (which efforts were successfully completed as
of May 1, 1998); and (iv) this category of expenses was 38% in the ETI division,
the results of which for February and March are included in the 1998 operating
results but not in the 1997 operating results.
Research and development expenses were substantially the same in the
two quarters being compared, and all such expenses are attributable to the
Company's research and development activities described in the second paragraph
of this section.
3
<PAGE> 4
As a consequence of the factors described above, the Company incurred
an operating loss of $614,000 in 1998's first quarter compared to $115,000 in
1997's first quarter. The 1998 results include an operating loss of $35,000 at
the Company's ETI division.
The extraordinary gain in 1998 of $293,606 reflects settlements with
various creditors of ETI entered into at the time of the "reverse acquisition"
transaction between Star and ETI in February, 1998.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 1998, the Company issued and
sold securities not registered under the Securities Act of 1933, as amended (the
"Act"), as follows:
(1) On February 6, 1998, the Company sold a total of 13,831 shares of
Series B Preferred Stock the former shareholders of Star Tobacco and
Pharmaceuticals, Inc. ("Star") in exchange for all of the capital Stock of Star.
Simultaneously with such issuance, a total of 183 shares of Series B Preferred
Stock, which are included among the 13,831 shares referred to above, were
transferred to three members of the Board of Directors of the Company. The stock
exchange transaction has been described in the Company's current report on Form
8-K filed with the Commission on February 18, 1998. The former shareholders of
Star consists of Jonnie R. Williams and Francis E. O'Donnell, Jr. and five
trusts for the benefit of family members.
(2) On February 6, 1998, the Company sold a total of 138,750 shares of
Common Stock to eight individuals, all of whom were management personnel,
ex-management personnel, or independent sales representatives of the Company, in
each case for more than two years. The consideration for the sale was, in the
case of current or former management personnel, past services rendered at
compensation levels less than what had been expected and a release from any
claims against the Company. In case of independent sales representatives,
consideration was a release from claims that the Company had promised to
initiate an incentive stock plan for independent sales representatives and that
the Company had failed to do so.
(3) On February 6, 1998, the Company sold a total of 1,013,500 shares
of Common Stock to four individuals, all of whom are or were management
personnel of the Company (including Chief Executive Officer). The consideration
was the extinguishment of debt to such individuals totaling $410,450, as well
as, in the case of Mr. Fitzsimmons, the cancellation of all outstanding stock
options and his employment contract.
(4) On February 6, 1998, the Company sold 7,500 shares of Common Stock
to Larry G. Leiske, M.D., a Director of the Company who resigned on that date.
The consideration was for services rendered by Dr. Leiske as a Director.
(5) On February 6, 1998, the Company sold 240,300 shares of Common
Stock to Samuel P. Sears, Jr., a Director of the Company and, as of that date,
an executive officer of the Company, in consideration for the extinguishment of
$56,332 of debt of the Company and the cancellation of a stock option to acquire
50,000 shares of Common Stock at a price of $.50 per share.
(6) Beginning February 25, 1998, and continuing throughout the month of
March, 1998, the Company sold a total of 2.9 million shares of Common Stock to
ten accredited and sophisticated individuals at $.50 per share for total cash
consideration of 1.45 million dollars, except for one investor who paid cash of
$23,000 and extinguished debt of the Company of approximately $85,000, for
100,000 shares of Common Stock.
4
<PAGE> 5
(7) In March, 1998, the Company sold a total of 232,000 shares of
Common Stock to four individuals upon redemption and cancellation of 2,320
shares of Class A Preferred Stock. 185,600 of such shares were issued in
satisfaction of the conversion privilege of 80-to-1. The remaining 46,400 shares
of Common Stock were issued in consideration of the Preferred Stockholders'
acceptance of the Company's offer that such shares would be issued to the
holders if they converted their shares of Preferred Stock rather than exercise
their right of redemption.
With respect to all of the sales described above, the Company claims exemption
from the registration provisions of the Act pursuant to Section 4(2) thereof as
transactions not involving a public offering.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The exhibits filed as part of this report are listed on the Index to
Exhibits of this report, which index is incorporated herein by reference.
(b) Reports on Form 8-K.
(i) The Company filed a Report on Form 8-K on February 19,
1998, which Report was amended (as permitted by the rules and
regulations of the Securities and Exchange Commission) by
amendment filed on April 20, 1998. Item 1, Change in Control
of Registrant, and Item 2, Acquisition or Disposition of
Assets, were included in this Report. Financial statements of
Star Tobacco and Pharmaceuticals, Inc. for the 1997 and 1996
fiscal years ended December 31, and pro forma combined
condensed financial statements of the Registrant, all as
required by the instructions to Form 8-K, were also filed as
part of the Report on Form 8-K.
(ii) The Company filed a Report on Form 8-K on March 30, 1998,
which Report was amended (as permitted by the rules and
regulations of the Securities and Exchange Commission) by
amendment filed April 10, 1998. Item 4, Changes in
Registrant's Certifying Accountant, was included in this
Report.
5
<PAGE> 6
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EYE TECHNOLOGY, INC.
Date: September 11, 1998 /s/ Samuel P. Sears, Jr.
--------------------------------------
Samuel P. Sears, Jr., President and
Chief Executive Officer
6
<PAGE> 7
Index to Unaudited Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C> <C>
1. Condensed Consolidated Balance Sheets F-2
dated March 31, 1998 and December 31, 1997
2. Condensed Consolidated Statements of Operations F-3
for the Three Month Periods Ended March 31, 1998 and 1997
4. Condensed Consolidated Statements of Cash Flows F-4
for the Three Month Periods Ended March 31, 1998 and 1997
5. Notes to Unaudited Condensed Consolidated Financial Statements F-6
</TABLE>
F-1
<PAGE> 8
EYE TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31,
1998 December 31,
Assets (Unaudited) 1997
------------ --------------
<S> <C> <C>
Current assets:
Cash $ 118,811 $ 10,929
Accounts receivable 621,007 775,168
Inventories 1,743,122 605,392
Advances to related parties 167,355 --
Other current assets 82,398 89,989
----------- -----------
Total current assets 2,732,693 1,481,478
----------- -----------
Property and equipment, net 2,177,992 2,415,632
----------- -----------
Other assets:
Intangibles, net of amortization 1,076,413 157,557
Other assets 118,729 64,969
----------- -----------
Total other assets 1,195,142 222,526
----------- -----------
$ 6,105,827 $ 4,119,636
=========== ===========
Liabilities and Stockholders' Deficit
Current liabilities:
Notes payable - current $ 1,478,711 $ 1,942,085
Accounts payable 3,169,269 2,735,686
Accrued expenses 896,085 85,108
----------- -----------
Total current liabilities 5,544,065 4,762,879
Notes payable, less current maturities 994,035 1,099,242
----------- -----------
Total liabilities 6,538,100 5,862,121
----------- -----------
Commitments and contingencies
Redeemable preferred stock 25,000 --
----------- -----------
Stockholders' deficit:
Preferred stock 138 --
Common stock 79,698 383,557
Additional paid-in capital 3,004,231 1,004,607
Accumulated deficit (3,541,340) (3,130,649)
----------- -----------
Total stockholders' deficit (457,273) (1,742,485)
----------- -----------
$ 6,105,827 $ 4,119,636
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE> 9
EYE TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net sales $ 3,069,636 $ 6,201,279
Cost of goods sold 1,505,003 3,111,150
Excise taxes on products 1,236,807 2,186,216
----------- -----------
Gross profit 327,826 903,913
----------- -----------
Operating expenses:
Marketing and distribution expenses 310,120 312,158
General and administrative expenses 384,139 435,642
Research and development 247,310 270,762
----------- -----------
Total operating expenses 941,569 1,018,562
----------- -----------
Operating loss (613,743) (114,649)
Other income (expenses):
Other (13,569) 12,851
Interest expense (76,985) (55,320)
----------- -----------
Loss before extraordinary item (704,297) (157,118)
Extraordinary gain from extinguishment of debt
(no applicable income taxes) 293,606 --
----------- -----------
Net loss $ (410,691) $ (157,118)
=========== ===========
Basic and diluted earnings (loss) per common share:
Loss before extraordinary item $ (.19) $ (786)
Extraordinary item $ .08 $ --
Net loss $ (.11) $ (786)
Weighted average number of shares 3,662,262 200
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE> 10
EYE TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Three Months end March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $ (410,691) $ (157,118)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and other non-cash charges 138,689 105,865
Extraordinary gain from extinguishment of debt (293,606) --
(Increase) decrease in current assets (29,098) 585,722
(Decrease) increase in current liabilities 251,297 180,737
----------- -----------
Net cash provided (used) by operating activities (343,409) 715,206
----------- -----------
Investing activities:
Advances to related parties (167,355) (432)
Purchases of intangible assets (460) --
Proceeds from sale of property and equipment 175,000 --
----------- -----------
Net cash used by investing activities (91,315) (432)
----------- -----------
Financing activities:
Proceeds from notes payable 48,500 --
Proceeds from capital contribution 1,488,679 --
Payments on notes payable (994,573) (676,074)
Stockholder distributions -- (38,700)
----------- -----------
Net cash provided (used) by financing activities 542,606 (714,774)
----------- -----------
Increase in cash 107,882 --
Cash, beginning of period 10,929 10,584
----------- -----------
Cash, end of period $ 118,811 $ 10,584
=========== ===========
Cash paid for:
Interest $ 81,231 $ 58,952
</TABLE>
See notes to condensed consolidated financial statements.
F-4
<PAGE> 11
EYE TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
For the Three Months ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Non-cash investing and financing activities:
Repayment of related party note payable with
related party note receivable $ -- $ 759,489
Conversion of related party note payable to equity $ -- $ 923,499
Conversion of redeemable preferred stock to equity $ 232,000 $ --
Notes payable reduced by proceeds from equipment sale $ 105,000 $ --
Acquisition:
Fair value of assets acquired $1,237,238 $ --
Liabilities assumed 2,001,688 --
---------- ----------
Excess assigned to goodwill $ 764,450 $ --
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
F-5
<PAGE> 12
EYE TECHNOLOGY, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A. Basis of presentation:
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the three months period ended March 31,
1998 are not necessarily indicative of the results to be expected for
the full year.
B. Description of acquisition:
On February 6, 1998, Eye Technology, Inc. and Subsidiaries, a
publicly-owned company, entered into a stock exchange agreement with
Star Tobacco & Pharmaceuticals, Inc., a privately-owned company. Under
the agreement, Star Tobacco & Pharmaceuticals, Inc. exchanged all of
its common stock for 13,831 shares of Series B convertible voting
preferred stock, par value $.01 per share. When converted this stock
would equal 45,365,680 shares of common stock, approximately 90% of the
outstanding common stock of Eye Technology, Inc. and Subsidiaries as of
the transaction date.
APB No. 16, paragraph 70 states that presumptive evidence of the
acquiring corporation in combinations effected by an exchange of stock
is obtained by identifying the former common stockholder interest of a
combining company which either retain or receive the larger portion of
the voting rights in the combined corporation. That corporation should
be treated as the acquirer unless other evidence clearly indicates that
another corporation is the acquirer. As the former stockholders of Star
Tobacco & Pharmaceuticals, Inc. hold the larger portion of the voting
rights of the combined corporation, the transaction has been recorded
as a reverse acquisition with Star Tobacco & Pharmaceuticals, Inc. as
the accounting acquirer. In a reverse acquisition, the accounting
acquirer is treated as the surviving entity, even though the
registrant's legal existence does not change. The accounting acquirer
treats the merger as a purchase acquisition. As a result, the merger
has been recorded using the historical cost basis for the assets and
liabilities of Star Tobacco & Pharmaceuticals, Inc., as adjusted, and
the estimated fair value of Eye Technology, Inc. and Subsidiaries
assets and liabilities. The excess of Eye Technology Inc. and
Subsidiaries' liabilities assumed over assets acquired amounted to
$764,450 and was assigned to goodwill which is being amortized over
five years on a straight-line basis.
The results of operations of Eye Technology, Inc. and Subsidiaries are
included in the accompanying condensed consolidated financial
statements from the date of acquisition.
The following summarized pro forma information assumes the acquisition
had occurred as of January 1, 1997.
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
Net sales $ 3,128,529 $ 6,571,365
Operating loss $ (643,812) $ (170,658)
Net income (loss) $ (445,807) $ 48,217
Earnings per share:
Basic and diluted $ (.08) $ .009
</TABLE>
F-6
<PAGE> 13
EYE TECHNOLOGY, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
C. Income taxes:
Effective February 6, 1998, Star Tobacco & Pharmaceuticals, Inc. will
no longer be treated as an S Corporation for tax purposes and will be
subject to corporate income taxes. If the Company had been subject to
corporate income taxes during 1997 and through February 6, 1998, it
would not have any current income tax liability due to its operating
losses. Star Tobacco & Pharmaceuticals, Inc. would have a deferred
income tax asset resulting from the net operating losses and a deferred
income tax liability resulting primarily from temporary differences in
depreciation. A valuation allowance would have been established to
fully reserve the excess of the deferred tax asset over the deferred
tax liability due to the uncertainty of the utilization of the
operating loss carryforward.
D. Extraordinary item:
During the first quarter of 1998, the Company recognized an
extraordinary gain of $293,606 as the result of its negotiated
settlements with vendors for trade accounts payable. There was no
income tax effect on the transactions.
E. Earnings (loss) per common share:
Earnings (loss) per common share is computed under the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per
Share". Basic earnings (loss) per common share is computed by dividing
net earnings (loss) by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per common share
includes the dilutive effect of potential common shares outstanding.
The Company's potential common shares outstanding are from preferred
stock. Basic and diluted earnings (loss) per share were the same in
1998 because all potential common shares were antidilutive.
F. Related party transactions:
During the first quarter of 1998, $167,355 was advanced to related
parties. These advances are scheduled to be repaid during 1998.
F-7
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- --------
<S> <C> <C>
10 License Agreement dated January 5, 1998, Incorporated by reference
by and between Star Tobacco and to Exhibit No. 10, Quarterly
Pharmaceuticals, Inc., as Licensee, and, Report on Form 10-QSB for
as Licensor, Regent Court Technologies, the quarter ended March 31,
Jonnie R. Williams, and Francis E. 1998
O'Donnell, Jr., M.D.
27 Financial Data Schedule Filed herewith
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 118,811
<SECURITIES> 0
<RECEIVABLES> 621,007
<ALLOWANCES> 0
<INVENTORY> 1,743,122
<CURRENT-ASSETS> 2,732,693
<PP&E> 3,851,688
<DEPRECIATION> 1,673,696
<TOTAL-ASSETS> 6,105,827
<CURRENT-LIABILITIES> 5,544,065
<BONDS> 0
25,000
138
<COMMON> 79,698
<OTHER-SE> (537,109)
<TOTAL-LIABILITY-AND-EQUITY> 6,105,827
<SALES> 3,069,636
<TOTAL-REVENUES> 3,069,636
<CGS> 2,741,810
<TOTAL-COSTS> 2,741,810
<OTHER-EXPENSES> 13,569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,985
<INCOME-PRETAX> (704,297)
<INCOME-TAX> 0
<INCOME-CONTINUING> (704,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 293,606
<CHANGES> 0
<NET-INCOME> (410,691)
<EPS-PRIMARY> ( .11)
<EPS-DILUTED> ( .11)
</TABLE>
