After tax earnings of $1.241MM on revs of $1.31MM, so what was before tax, LOL, how can profits be almost equal to, or more than, revs????
Whoa, I see now, ROYALTIES!!!
ADVANCED TOBACCO PRODUCTS INC (AVTH)
Quarterly Report (SEC form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operation
RESULTS OF OPERATIONS
In 1987, the Company sold patented nicotine technology, which forms the basis of the Nicorette /Nicotrol Inhaler, to what is
now known asPharmacia & Upjohn, Inc. ("P&U") in exchange for product payments. Productpayments from the non U.S.
sales of the Nicorette Inhaler are 3% of P&U'snet sales to pharmacy distributors. Product payments from the sales of the
Nicotrol Inhaler in the U.S. are 9.9% of P&U's net sales to McNeilConsumer Products Company ("McNeil"), a Johnson &
Johnson Company, which markets the Nicotrol Inhaler to pharmacies as a prescription product.
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 theexpiration of all issued patents enforceable in such countries. If the netsales to pharmacy distributors
cannot be obtained or is not disclosed, asis the case with regard to McNeil, net sales are determined by multiplyingthe net sales
of P&U to McNeil by 3.3 (in effect, 9.9% of P&U's sales toMcNeil). There are product payment limitations in the event of the
sale ofa nicotine vapor product competitive with the Nicorette /Nicotrol Inhaler. Product payments in excess of $1,000,000
per year ($333,000 in respect ofEurope and $667,000 in respect of the rest of the world) are to be reducedby fifty percent
(50%) until the aggregate of such reductions equal the sum of $4,400,000.
McNeil launched the Nicotrol Inhaler nationwide in the U.S. as a prescription product in September 1998 (the U.S. is
approximately 50% ofthe worldwide nicotine replacement therapy ("NRT") market). P&U has also introduced the Nicorette
Inhaler, primarily as an over-the-counter product, in the United Kingdom, New Zealand, Ireland, Norway, Sweden, Denmark,
Italy, Austria, The Netherlands, Belgium, Finland, Iceland,Gibralter and Hong Kong. The Company understands that additional
countrylaunches are planned by P&U to occur as regulatory approvals are granted.
The Nicorette/Nicotrol Inhaler is the first and only form of NRT designedto help control a smoker's cravings for cigarettes
while providing a key behavioral component of smokingthe 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, the Company obtained an exclusive worldwide license to certain dry powder nicotine inhaler technology
from Duke University. The Company has obtained patents covering this technology. The Company believes that a dry powder
nicotine inhaler has the potential to be a future generation NRT. The Company is continuing to seek a strategic partner to
develop this technology.
Effective as of October 1993, the Company has an agreement with P&U under which, among other matters, the Company has
the right to receive a royalty equal to .1% of net revenues received by P&U from the sale of any product using a nicotine
impermeable copolymer technology. Under the terms of the agreement, the Company now receives royalties from the sales of
the Nicorette/Nicotrol patch by P&U.
The Company's operations include no material dependence on any computeroperations or on the preparation for year 2000 of
any computer operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash resources, including investments, available on June 30, 1999, were approximately $1,930,000, as compared to
approximately $1,520,000 as of June 30, 1998.
COMPARISON OF SELECTED FINANCIAL DATA
Operating revenues for the nine month period ending June 30, 1999, increased to $858,431, as compared to $495,944 for the
nine month period ending June 30, 1998. This increase is due to an increase in product payments from P&U as the Nicorette
/Nicotrol Inhaler continues to be launched worldwide.
Interest income for the nine month period ending June 30, 1999, increased to $70,089, as compared to $57,651 for the nine
month period ending June 30, 1998. This increase is primarily due to an increase in cash resources available to the Company.
Net income for the nine month period ending June 30, 1999, increased to $812,416, as compared to $472,499 for the nine
month period ending June 30, 1998. This increase is due to an increase in product payments from P&U as the
Nicotrol/Nicorette Inhaler continues to be launched worldwide.
General and administrative expenses for the nine month period ending June 30, 1999, increased to $116,104, as compared to
$81,096 for the nine month period ending June 30, 1998. This increase is primarily due to administrative costs associated with
issuing a dividend of $.07 per share of common stock on January 6, 1999.
Accumulated deficit decreased $245,966 from September 30,1998, to June 30, 1999. The decrease was due to net income
for the nine month period ended June 30, 1999, of $812,416 which was partially offset by the payment of dividends of
$566,450. |
