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 September 30, 1997
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 October 31, 1997
PART I - FINANCIAL STATEMENTS
Item 1: Financial Statements
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
BALANCE SHEETS
(Unaudited) (Audited)
September 30 June 30
1997
ASSETS:
CURRENT ASSETS:
Cash & cash equivalents $ 79,180 $ 38,877
Investments 256,311 454,428
Accounts Receivable -0- 79,539
Accrued Royalty 22,500 -0-
Total current assets: 358,009 572,844
LICENSE AGREEMENTS, Net: 159,580 159,074
INVESTMENTS: 1,086,019 868,570
TOTAL ASSETS: $ 1,603,590 $ 1,600,488
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Accounts payable $ 15,240 $ 6,760
TOTAL LIABILITIES: 15,240 6,760
SHAREHOLDER'S EQUITY:
Common stock - authorized,
30,000,000 shares of $.01
par value; 8,092,136
shares outstanding as
of September 30, 1997,
and June 30, 1997,
respectively 80,922 80,922
Additional paid-in-capital 12,544,878 12,544,878
Accumulated deficit (11,037,450) (11,032,072)
TOTAL STOCKHOLDERS' EQUITY 1,588,350 1,593,728
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,603,590 $ 1,600,488
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF INCOME
(Unaudited)
Three Months Ended September 30
1997 1996
REVENUES:
Royalty Income $ 22,500 $ -0-
Royalty Adj. from Prior Period (1,844) -0-
Total operating revenues: 20,656 -0-
EXPENSES:
General and administrative 45,700 57,342
Total operating expenses: 45,701 57,342
INCOME (LOSS) FROM OPERATIONS: (25,044) (57,342)
OTHER INCOME:
Interest Income 19,666 18,731
Total other income 19,666 18,731
NET INCOME: $ (5,379) $(38,611)
WEIGHTED AVERAGED NUMBER OF
SHARES OF COMMON STOCK
OUTSTANDING: 8,092,136 7,952,136
EARNINGS PER COMMON SHARE: $ (.001) $ (.005)
ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended September 30
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss): $ (5,379) $ (38,611)
Adjustments to reconcile net income
(loss) to net cash:
Amortization 1,670 1,670
Accounts receivable 79,539 -0-
Accrued royalty (22,500) -0-
Accounts payable and accrued
liabilities 8,480 29,912
Net cash provided by operations: 61,810 (7,029)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenses of license agreements (2,175) (381)
Net cash provided by investments: (2,175) (381)
NET INCREASE (DECREASE) IN CASH: 59,636 (7,410)
CASH & INVESTMENTS AT BEGINNING
OF PERIOD: 1,361,875 1,330,189
CASH & INVESTMENTS AT END
OF PERIOD: $1,421,510 $1,322,779
NOTES TO FINANCIAL STATEMENTS
The condensed financial statements included herein were prepared by the Company
without audit. Certain information and footnote disclosures normally
included in financial statements have been omitted. The condensed financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K as of
June 30, 1997.
Item 2: Managements Discussion and Analysis of Financial
Condition and Results of Operation
RESULTS OF OPERATIONS
In 1987, the Company sold nicotine technology and related assets to what is now
known as Pharmacia & Upjohn, Inc. ("Pharmacia & Upjohn"), a worldwide
pharmaceutical company that manufacturers the Nicorette Chewing/Gum,
the Nicorette/Nicotrol Patch, the Nicorette/Nicotrol Nasal Spray and the
Nicorette/Nicotrol Inhaler.
Based upon the nicotine technology acquired from the Company, Pharmacia &
Upjohn developed the Nicorette/Nicotrol Inhaler for use in the nicotine
replacement therapy ("NRT") market. ATP receives product payments of 3% of
sales of the Inhaler to wholesale distributors (see paragraph below).
Pharmacia & Upjohn launched the Inhaler commercially in Denmark in September
1996, in Sweden in December 1996, in Italy in February 1997, in the
Netherlands in July, 1997, and in Austria in September, 1997, under the
trade name of the Nicorette Inhaler. Additional worldwide launches are
planned by Pharmacia & Upjohn to occur as regulatory approvals are granted.
Applications for regulatory approvals are pending in ten countries,
including the United Kingdom.
The Inhaler was recently approved for sale as a prescription product by the
United States Food and Drug Administration, and the Company anticipates that
the Inhaler will be initially offered in the U.S. in the first half of 1998
as the Nicotrol Inhaler by McNeil Consumer Products, a Johnson & Johnson
company. The U.S. represents approximately 50% of the world NRT market.
The Inhaler is the only NRT product to help smokers quit by addressing the
hand-to-mouth motions of smokers, as well as providing a sensation in the
back of the throat similar to the feeling of inhaling smoke.
In September 1992, the Company obtained an exclusive worldwide license to
certain dry powder nicotine inhaler technology from Duke University. In
February 1993, the Company filed a patent application covering this
technology resulting in the issuance of a U.S. patent in 1995. Additional
U.S. and foreign patent applications are pending. The Company believes that
a dry powder nicotine inhaler has the potential to be a future generation
NRT product. The Company is continuing to seek a strategic partner to
develop this technology.
Effective as of October 1993, the Company has an agreement with Pharmacia &
Upjohn under which, among other matters, the Company has the right to
receive a royalty equal to .1% of net revenues received by Pharmacia &
Upjohn from the sale of any product using a nicotine impermeable copolymer
technology covered by, and subsequent to, the issuance of a patent in
March 1996. Under the terms of the agreement, the Company now receives
royalties from the sales of the Nicorette/Nicotrol patch by Pharmacia &
Upjohn.
The Company has the right to receive royalty payments from Pharmacia &
Upjohn with respect to the Nicorette/Nicotrol Inhaler of three percent (3%)
of Net Sales (defined generally as sales by Pharmacia & Upjohn and McNeil
Consumer Products to wholesale distributors) payable on a country by country
basis for the greater of 10 years following the date of the first commercial
sales or the expiration of all issued patents (latest patent issued
3/26/96). There are royalty limitations in the event of the sale of a
nicotine vapor product competitive with the Nicorette/Nicotrol Inhaler.
Royalty payments in excess of $1,000,000 per year are to be reduced by fifty
percent (50%) until the aggregate of such reductions equal the sum of
$4,400,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash resources, including investments, available on September 30, 1997,
were approximately $1,430,000 as compared to approximately $1,323,000 for
September 30, 1996.
COMPARISON OF SELECTED FINANCIAL DATA
Operating Revenues for the three month period ended September 30, 1997,
increased to $20,656, as compared to $-0- for the three month period ended
September 30, 1996. This increase is due to the recognition of income from
the Inhaler and the nicotine impermeable copolymer technology.
Interest income for the three-month period ended September 30, 1997,
increased to $19,666 as compared to $18,731 for the three-month period
ended September 30, 1996. This increase is primarily due to an increase
in cash resources and investments.
Net income for the three-month period ended September 30, 1997, increased
to a net loss of $5,379 as compared to a net loss of $38,611 for the
three-month period ended September 30, 1996. This increase is primarily
due to the recognition of royalty income from the Inhaler and the nicotine
impermeable copolymer technology. The company understands that European
sales increased during the reporting quarter; however, royalty income was
lower than the proceeding quarter due to a reduction in inventory stocking
of distributors and retailers.
General and administrative expenses for the three-month period ended
September 30, 1997, decreased to $45,701 as compared to $57,342 for the
three-month period ended September 30, 1996. This decrease is primarily
due to absence in the first quarter of 1997 of a one-time bonus awarded in
the first quarter of 1996 to a consultant and a Director of the Company.
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: November 14, 1997
By: /s/ J. W. Linehan
J. W. Linehan, Chief
Executive Officer and
Chief Accounting Officer
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