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, 2003
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 of incorporation or organization) | (I.R.S. Employer Identification No.) |
16607 Blanco Road, Suite 703, 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.
Yes [ ] No [X]
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.
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 May 2, 2003
ADVANCED TOBACCO PRODUCTS, INC. | PART I - FINANCIAL INFORMATION |
dba ADVANCED THERAPEUTIC PRODUCTS, INC | ITEM 1: Financial Statements |
BALANCE SHEET | |
(Unaudited) | (Audited) | |
March 31 | September 30 | |
2003 | 2002 | |
ASSETS: | | |
CURRENT ASSETS: | | |
Cash & cash equivalents | $13,121 | $348,422 |
Product Payments Receivable | 169,069 | 187,385 |
Interest Receivable | 2,033 | 2,077 |
Investments | 546,835 | 568,212 |
TOTAL CURRENT ASSETS: | 731,058 | 1,106,096 |
LICENSE AGREEMENTS, Net: | 134,969 | 144,098 |
LONG TERM INVESTMENTS: | 1,131,979 | 1,149,529 |
TOTAL ASSETS: | $1,998,006 | $2,399,723 |
LIABILITIES AND STOCKHOLDERS' EQUITY: | | |
Book Overdraft | 10,656 | $21,515 |
Accrued Liabilities | | 22,345 |
TOTAL LIABILITIES: | 10,656 | 43,860 |
STOCKHOLDERS’ EQUITY: | | |
Common stock, $.01 par value; | | |
30,000,000 shares authorized; | | |
8,222,136 shares issued and outstanding as of March 31, | | |
2003, and September 30, 2002, respectively | 82,222 | 82,222 |
Additional paid-in-capital | 12,595,767 | 12,595,767 |
Accumulated deficit | (10,690,639) | (10,322,126) |
TOTAL STOCKHOLDERS' EQUITY: | 1,987,350 | 2,355,863 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY: | $1,998,006 | $2,399,723 |
ADVANCED TOBACCO PRODUCTS, INC. |
dba ADVANCED THERAPEUTIC PRODUCTS, INC. |
CONDENSED STATEMENT OF INCOME |
(Unaudited) |
Three Months Ended March 31 |
2003 | 2002 |
REVENUES: | | | |
Product Payments | $ 169,069 | $ 163,680 | |
Total operating revenues: | 169,069 | 163,680 | |
| | | |
EXPENSES: | | | |
General and administrative | 73,993 | 54,645 | |
Total operating expenses: | 73,993 | 54,645 | |
| | | |
INCOME FROM OPERATIONS: | 95,076 | 109,035 | |
| | | |
OTHER INCOME: | | | |
Interest Income | 20,305 | 20,013 | |
Total other income: | 20,305 | 20,013 | |
| | | |
NET INCOME: | $ 115,381 | $ 129,048 | |
| | | |
| | | |
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 |
$ .014
|
$ .016
| |
ADVANCED TOBACCO PRODUCTS, INC. |
dba ADVANCED THERAPEUTIC PRODUCTS, INC. |
CONDENSED STATEMENT OF INCOME |
| (Unaudited) | |
| Six Months Ended March 31 | |
| 2003 | 2002 | |
REVENUES: | | |
Product Payments | $ 393,132 | $ 362,488 |
Total operating revenues: | 393,132 | 362,488 |
| | |
EXPENSES: | | |
General and administrative | 146,848 | 130,352 |
Total operating expenses: | 146,848 | 130,352 |
| | |
INCOME FROM OPERATIONS: | 246,284 | 232,136 |
| | |
OTHER INCOME: | | |
Interest Income | 42,974 | 42,342 |
Total other income: | 42,974 | 42,342 |
| | |
NET INCOME: | $ 289,258 | $ 274,478 |
| | |
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 |
$ .035
|
$ .03
|
ADVANCED TOBACCO PRODUCTS, INC. |
dba ADVANCED THERAPEUTIC PRODUCTS, INC. |
CONDENSED STATEMENTS OF CASH FLOWS |
(Unaudited) | |
Six Months Ended March 31 | |
2003 | 2002 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | |
Net income: | $289,258 | $ 274,478 |
Adjustments to reconcile net income to net cash provided by operating activities: | | |
Amortization of license agreements | 9,129 | 8,752 |
Amortization of discount on investments | (36,447) | (35,857) |
Increase in cash flows from changes in operating assets and liabilities: | | |
Payments receivable | 18,316 | (21,585) |
Interest receivable | 44 | (910) |
Accounts payable | (11,689) | (15,676) |
Net cash provided by operating activities: | 268,610 | 209,202 |
CASH FLOWS FROM INVESTING ACTIVITIES: | | |
Purchase of investments | (99,626) | (380,890) |
Sale or maturity of investments | 175,000 | 450,000 |
Net cash provided by investing activities: | 75,374 | 69,110 |
CASH FLOWS FROM FINANCING ACTIVITIES: | | |
Change in book overdraft | (21,515) | -0- |
Dividends paid | (657,770) | (411,107) |
Net cash used in financing activities: | (679,285) | (411,107) |
NET DECREASE IN CASH AND CASH EQUIVALENTS: |
(335,301)
|
(132,795)
|
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD: | 348,422 | 193,498 |
CASH & CASH EQUIVALENTS AT END OF PERIOD: | $ 13,121 | $ 60,703 |
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, 2002.
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operation
FORWARD-LOOKING STATEMENTS
The forward-looking information contained in this report on Form 10-Q is subject to change as the result of business, economic, competitive, regulatory, or other contingencies and uncertainties which cannot be predicted and which are beyond the control of ATP and are subject to changes in the plans of PHA with regard to the Nicotrol®/Nicorette® Inhaler which are entirely at the discretion of PHA.
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 AB and Pharmacia & Upjohn Company (“PHA”), in exchange for product payments of 3% of PHA’s net sales of the Inhaler. ATP understands that on April 15, 2003, PHA became subsidiaries of Pfizer Inc.
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, Canada, Czech Republic, Denmark, Estonia, Finland, France, Hong Kong, Iceland, Ireland, Italy, Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Portugal, Russia, Singapore, South Africa, Sweden, Switzerland, Taiwan, and the 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.
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 certain countries.
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, 2003, were $1,691,935 as compared to $1,691,950 as of March 31, 2002. On January 10, 2003, and January 9, 2002, ATP paid dividends aggregating $657,770 (8 cents per share) and $411,108 (5 cents per share) respectively.
COMPARISON OF SELECTED FINANCIAL DATA
Operating revenues for the six month period ending March 31, 2003, increased to $393,132, as compared to $362,488 for the six month period ending March 31, 2002. This increase is due to an increase in Inhaler product payments from PHA.
Interest income for the six month period ending March 31, 2003, increased to $42,973 as compared to $42,342 for the six month period ending March 31, 2002. This increase is due to minor variations in earnings on investments.
Net income for the six month period ending March 31, 2003, increased to $289,257 as compared to $274,478 for the six month period ending March 31, 2002. This increase is due to an increase in Inhaler product payments from PHA
General and administrative expenses for the six month period ending March 31, 2003, increased to $146,848 as compared to $130,352 for the six month period ending March 31, 2002. This increase is due to minor variations in general and administrative expenses.
Item 4: Controls and Procedures.
Within the 90-day period immediately preceding the filing of this report, the registrant's chief executive officer and chief financial officer has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934). Based on that evaluation, the registrant's chief executive officer and chief financial officer concluded that the design and operation of the registrant's disclosure controls and procedures were effective as of the date of that evaluation. There have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of that evaluation.
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 6, 2003
| By: /s/ |
| J. W. Linehan, |
| Executive Officer and Chief |
| Financial and Accounting Officer |
CERTIFICATIONS
I, J. W. Linehan, Chief Executive Officer and Chief Financial and Accounting Officer of Advanced Tobacco Products. Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Advanced Tobacco Products. Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Dated: May 6, 2003
| By: /s/ |
| J. W. Linehan, |
| Executive Officer and Chief |
| Financial and Accounting Officer |
