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, 2002.
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 703, San Antonio, Texas 78232 (Address of principal executive offices)(Zip Code)
(210) 408-1995 (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:
8,212,136 as of March 31, 2002
ADVANCED TOBACCO PRODUCTS, INC. PART I - FINANCIAL INFORMATION dba ADVANCED THERAPEUTIC PRODUCTS, INC. ITEM 1: Financial Statements CONDENSED BALANCE SHEET (Unaudited) (Audited) March 31 September 30 2002 2001
| ASSETS: | ||
| CURRENT ASSETS: | ||
| Cash & cash equivalents | $ 60,703 | $ 193,498 |
| Product Payments Receivable | 163,680 | 142,095 |
| Interest Receivable | 3,346 | 2,436 |
| Investments | 462,964 | 559,456 |
| TOTAL CURRENT ASSETS: | 690,693 | 897,485 |
| LICENSE AGREEMENTS, Net: | 153,600 | 162,352 |
| LONG TERM INVESTMENTS: | 1,168,283 | 1,105,044 |
| TOTAL ASSETS: | $2,012,576 | $2,164,881 |
| LIABILITIES AND STOCKHOLDERS' EQUITY: | ||
| LIABILITIES: | ||
| Accrued Liabilities | $ 24,474 | $ 40,150 |
| TOTAL LIABILITIES: | 24,474 | 40,150 |
| STOCKHOLDERS' EQUITY: | ||
| Common stock, $.01 par value; | ||
| 30,000,000 shares authorized; | ||
| 8,222,136 shares issued and outstanding as of March 31, | ||
| 2002, and September 30, 2001, respectively | 82,222 | 82,222 |
| Additional paid-in-capital | 12,595,767 | 12,595,767 |
| Accumulated deficit | (10,689,887) | (10,553,258) |
| TOTAL STOCKHOLDERS' EQUITY: | 1,988,102 | 2,124,731 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY: | $2,012,576 | $2,164,881 |
ADVANCED TOBACCO PRODUCTS, INC. dba ADVANCED THERAPEUTIC PRODUCTS, INC. CONDENSED STATEMENT OF INCOME (Unaudited) Three Months Ended March 31 2002 2001
| REVENUES: | ||
| Product Payments | $ 163,680 | $ 163,063 |
| Total operating revenues: | 163,680 | 163,063 |
| EXPENSES: | ||
| General and administrative | 54,645 | 51,094 |
| Total operating expenses: | 54,645 | 51,094 |
| INCOME FROM OPERATIONS: | 109,035 | 111,969 |
| OTHER INCOME: | ||
| Interest Income | 20,013 | 20,272 |
| Total other income: | 20,013 | 20,272 |
| NET INCOME: | $ 129,048 | $ 132,241 |
| WEIGHTED AVERAGED NUMBER OF SHARES | ||
| OF COMMON STOCK OUTSTANDING: | 8,222,136 | 8,222,136 |
| WEIGHTED AVERAGED NUMBER OF SHARES | ||
| OF COMMON STOCK OUTSTANDING - | ||
| ASSUMING DILUTION: | 8,222,136 | 8,222,136 |
| INCOME PER COMMON SHARE - BASIC AND | ||
| ASSUMING DILUTION | $ .02 | $ .02 |
ADVANCED TOBACCO PRODUCTS, INC. dba ADVANCED THERAPEUTIC PRODUCTS, INC. CONDENSED STATEMENT OF INCOME (Unaudited) Six Months Ended March 31 2002 2001
| REVENUES: | ||
| Product Payments | $ 362,488 | $ 356,782 |
| Total operating revenues: | 362,488 | 356,782 |
| EXPENSES: | ||
| General and administrative | 130,352 | 86,194 |
| Total operating expenses: | 130,352 | 86,194 |
| INCOME FROM OPERATIONS: | 232,136 | 270,588 |
| OTHER INCOME: | ||
| Interest Income | 42,342 | 44,652 |
| Total other income: | 42,342 | 44,652 |
| NET INCOME: | $ 274,478 | $ 315,240 |
| WEIGHTED AVERAGED NUMBER OF SHARES | ||
| OF COMMON STOCK OUTSTANDING: | 8,222,136 | 8,212,081 |
| WEIGHTED AVERAGED NUMBER OF SHARES | ||
| OF COMMON STOCK OUTSTANDING - | ||
| ASSUMING DILUTION: | 8,222,136 | 8,212,143 |
| INCOME PER COMMON SHARE - BASIC AND | ||
| ASSUMING DILUTION | $ .03 | $ .04 |
ADVANCED TOBACCO PRODUCTS, INC. dba ADVANCED THERAPEUTIC PRODUCTS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended March 31 2002 2001
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net income: | $ 274,478 | $ 315,240 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Amortization of license agreements | 8,752 | 17,930 |
| Amortization of discount on investments | (35,857) | (37,430) |
| Increase in cash flows from changes | ||
| in operating assets and liabilities | ||
| Payments receivable | (21,585) | (55,271) |
| Interest receivable | (910) | -0- |
| Accounts payable | (15,676) | (15,756) |
| Net cash provided by operating activities: | 209,202 | 224,713 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Purchase of license agreements and patent costs | -0- | (1,750) |
| Purchase of investments | (380,890) | (214,491) |
| Sale or maturity of investments | 450,000 | 300,000 |
| Net cash provided by investing activities: | 69,110 | 83,759 |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Exercise of Stock Options | -0- | 8,439 |
| Dividends Paid | (411,107) | (411,108) |
| Net cash used in financing activities: | (411,107) | (402,669) |
| NET DECREASE IN CASH AND CASH EQUIVALENTS: |
(132,795) |
(94,197) |
| CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD: | 193,498 | 123,746 |
| CASH & CASH EQUIVALENTS AT END OF PERIOD: | $ 60,703 | $ 29,549 |
NOTES TO CONDENSED 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, 2001.
Item 2:Management's Discussion and Analysis of Financial Condition and Results of Operation
DISCUSSION OF OPERATIONS
In 1987, ATP sold patented nicotine technology, which forms the basis of the Nicorette/Nicotrol Inhaler ("Inhaler"), to what is now Pharmacia Corporation ("PHA"), in exchange for product payments of 3% of PHA's net sales of the Inhaler.
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. There are payment limitations in the event of the sale of a nicotine vapor product competitive with the Inhaler.
The Inhaler was launched nationwide in the U.S. as a prescription product in 1998. PHA has introduced the Inhaler, primarily as an over-the-counter product, in Australia, Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Hong Kong, Iceland, Ireland, Italy, Malta, Mexico, Netherlands, New Zealand, Norway, Portugal, Russia, Singapore, Sweden, Switzerland, Taiwan, and United Kingdom.
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, inhaling the nicotine, which is then absorbed through the lining of the mouth.
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 PHA's Nicorette/Nicotrol Patch.
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.
LIQUIDITY AND CAPITAL RESOURCES
Cash resources, including investments, available on March 31, 2002, were $ 1,691,950 as compared to $1,582,421 as of March 31, 2001. On January 9, 2002, January 10, 2001 and January 10, 2000, ATP paid dividends aggregating $411,107 (5 cents per share), $411,108 (5 cents per share) and $1,228,820 (15 cents per share) respectively.
COMPARISON OF SELECTED FINANCIAL DATA
Operating revenues for the six month period ending March 31, 2002, increased to $362,488 , as compared to $356,782 for the six month period ending March 31, 2001. This increase is due to an increase in Inhaler product payments from PHA.
Interest income for the six month period ending March 31, 2002, decreased to $42,342 as compared to $44,652 for the six month period ending March 31, 2001. This decrease is due to minor variations in earnings on investments.
Net income for the six month period ending March 31, 2002, increased to $274,478 as compared to $265,240 for the six month period ending March 31, 2001, after adjusting net income for the six month period ending March 31, 2001, for a non-recurring payment of $50,000 which was credited against general and administrative expenses. The non-recurring payment was a "stand still" fee paid by a third party for a review of ATP and its assets.
General and administrative expenses for the six month period ending March 31, 2002, decreased to $130,352 as compared to $136,194 for the six month period ending March 31, 2001, when adjusted for the non-recurring payment.
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 , 2002
By: /S/ J. W. Linehan J. W. Linehan, Executive Officer and Chief Accounting Officer