FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

[ ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1998

OR

[X]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
     OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from July 1, 1998 to September 30, 1998
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 September 30, 1998




ADVANCED TOBACCO PRODUCTS, INC.               PART I - FINANCIAL INFORMATION
dba ADVANCED THERAPEUTIC PRODUCTS, INC.         ITEM 1:  Financial Statements
BALANCE SHEETS
                                     (Unaudited)               (Audited)
                                     September 30                June 30
                                        1998                       1998

ASSETS:          
          
CURRENT ASSETS:          
   Cash & cash equivalents          $  449,481                  $   91,431  
    Investments                        471,456                     467,184  
    Accounts Receivable                  -0-                       384,059  
    Accrued Royalty                    352,000                       -0-   
          
          Total current assets:      1,272,937                     942,674  
          
LICENSE AGREEMENTS, Net:               161,804                     159,986  
          
INVESTMENTS:                           977,015                     960,991  

          TOTAL ASSETS:             $2,411,756                  $2,063,651  
           
LIABILITIES AND SHAREHOLDERS' EQUITY:          
          
LIABILITIES:          
    Accounts payable                $   19,149                  $    2,802  

        TOTAL LIABILITIES:              19,149                       2,802  

SHAREHOLDER'S EQUITY:          
    Common stock - authorized, 30,000,000
      shares of $.01 par value; 8,092,136
      shares outstanding as of
      September 30, 1998, and 
      June 30, 1998, respectively       80,922                      80,922  
    Additional paid-in-capital      12,544,878                  12,544,878  
    Accumulated deficit            (10,233,193)                (10,564,951) 

    TOTAL STOCKHOLDERS' EQUITY:      2,392,607                   2,060,849  

    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY:          $2,411,756                  $2,063,651  



ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENT OF INCOME 
                                             (Unaudited)
                                         Three Months Ended September 30
                                         1998                   1997

REVENUES: 
    Royalty Income, Net               $  352,000             $   20,656  
         Total operating revenue:        352,000                 20,656  

EXPENSES:          
    General and Administrative            40,868                 45,700  
         Total expenses:                  40,868                 45,700  
          
INCOME FROM OPERATIONS:                  311,132                (25,044) 

OTHER INCOME :
    Interest Income                       20,624                 19,666  
         Total other income:              20,624                 19,666  

NET INCOME:                           $  331,756             $   (5,379) 
          
WEIGHTED AVERAGED NUMBER OF SHARES
  OF COMMON STOCK OUTSTANDING:         8,092,136              8,092,136  
          
WEIGHTED AVERAGED NUMBER OF SHARES
  OF COMMON STOCK OUTSTANDING - 
  ASSUMING DILUTION:                   8,292,136              8,292,136

INCOME PER COMMON SHARE - BASIC AND
  ASSUMING DILUTION:                  $      .04             $      NIL 





ADVANCED TOBACCO PRODUCTS, INC.
dba ADVANCED THERAPEUTIC PRODUCTS, INC.
STATEMENTS OF CASH FLOWS


                                                    (Unaudited)
                                         Three Months Ended September 30
                                             1998                1997

CASH FLOWS FROM OPERATING ACTIVITIES:          
    Net income:                          $  331,756          $  (5,379) 
    Adjustments to reconcile net 
     income to net cash:
       Amortization                           1,670              1,670  
       Accounts receivable                  384,059             79,539  
       Accrued royalties                   (352,000)           (22,500) 
       Accounts payable and accrued 
        liabilities                          16,343              8,480  

    Net cash provided by operations:        381,828             61,810  
          
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenses of license agreements   (3,488)            (2,175) 
          
    Net cash provided (used) by 
     investments:                            (3,488)            (2,175) 


NET INCREASE IN CASH:                       378,340             59,636  

CASH & INVESTMENTS AT BEGINNING
 OF PERIOD:                               1,519,606          1,361,875  

CASH & INVESTMENTS AT END OF PERIOD:     $1,897,946         $1,421,510  










NOTES TO FINANCIAL STATEMENTS

     The condensed financial statements included herein have been prepared
 by Advanced Tobacco Products, Inc. (the Company) without audit, prusuant
 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 the Company's management, 
 necessary for the fair presentation of the Company's results of operations
 for the periods 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 the Company 
 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 the Company's Annual Report on Form 10-K as of June 30, 1998.


Item 2:     Management's Discussion and Analysis of Financial
            Condition and Results of Operation


RESULTS OF OPERATIONS

     In 1987, the Company sold its nicotine technology and related assets to
 what is now known as Pharmacia & Upjohn, Inc. ("Pharmacia & Upjohn"),
 a worldwide pharmaceutical company that manufactures the Nicorette Chewing
 Gum, the Nicotrol/Nicorette Patch, the Nicotrol/Nicorette Nasal Spray and
 the Nicotrol/Nicorette Inhaler.  

     Based upon the nicotine technology acquired from the Company, Pharmacia
 & Upjohn developed the Nicotrol/Nicorette Inhaler (the "Inhaler") for use in
 the nicotine replacement therapy ("NRT") market. ATP receives product
 payments from Pharmacia & Upjohn equal to 3% of its net sales of the Inhaler
 to pharmacy distributors in Europe.  Product payments from the sales of the
 Inhaler in the U. S. are 9.9% of Pharmacia & Upjohn's net sales to McNeil
 Consumer Products Company ("McNeil"), a Johnson & Johnson Company, who then
 markets the Inhaler to pharmacies.

     Royalty payments of three percent (3%) of Net Sales (generally, sales by
 Pharmacia & Upjohn to wholesale distributors) are 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 enforceable in such
 countries.  If the Net Sales to wholesale distributors cannot be obtained or
 is not disclosed, as is the case with regard to McNeil, Net Sales are
 determined by multiplying the net sales of Pharmacia & Upjohn to McNeil by
 3.3 (in effect, 9.9% of Pharmacia & Upjohn's sales to McNeil).  There are
 royalty limitations in the event of the sale of a nicotine vapor product
 competitive with the 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.
     
     In early September 1998, McNeil launched the Inhaler nationwide in the
 U.S. as a prescription product after an initial introduction earlier in 1998
 in Houston, Baltimore and Washington, D.C. The U.S. represents almost 50%
 of the worldwide NRT market. 

     Since September 1996, Pharmacia & Upjohn has introduced the Inhaler in
 Denmark, Sweden, Italy, Austria, The Netherlands, Belgium, Finland, Iceland,
 Gibralter and the United Kingdom.  The Inhaler is sold as an
 over-the-counter product in most of these European countries.  The Company
 understands that additional country launches are planned by Pharmacia &
 Upjohn to occur as regulatory approvals are granted.

     The Inhaler is the first and only form of NRT designed to help control a
 smoker's cravings for cigarettes and provide 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 to inhale
 the nicotine which is then absorbed through the lining of the mouth.  The
 Inhaler provides 30% of the nicotine a smoker gets from cigarettes.  It does
 not contain any of the harmful substances like tar and carbon monoxide found
 in tobacco smoke which cause smoking related diseases like lung cancer. 

     In September 1992, the Company obtained an exclusive worldwide license to
 certain dry powder nicotine inhaler technology from Duke University.  The
 Company has obtained three 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 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 Nicotrol/Nicorette patch by Pharmacia &
 Upjohn.

     The Company's operations include no material dependence on any corporate
 operations or on the preparation for year 2000 of any corporate operations.

LIQUIDITY AND CAPITAL RESOURCES

     Cash resources, including investments, available on September 30, 1998,
 were approximately $1,900,000 as compared to approximately $1,400,000 for
 September 30, 1997.


COMPARISON OF SELECTED FINANCIAL DATA

     Operating Revenues for the three month period ending September 30, 1998,
 increased to $352,000, as compared to $20,656 for the three month period
 ending September 30, 1997.  This increase is due to a increase in product
 payments from Pharmacia & Upjohn as the Nicorette/Nicotrol Inhaler continues to
 be launched worldwide.

     Interest income for the three month period ending September 30, 1998,
 increased to $20,624, as compared to $19,666 for the three month period
 ending September 30, 1997.  This increase is primarily due to minor interest
 rate fluctuations.

     Net income for the three month period ending September 30, 1998, increased
 to $331,756, as compared to a net loss of $5,379 for the three month period
 ending September 30, 1997.  This increase is due to an increase in product
 payments from Pharmacia & Upjohn as the Inhaler continues to be launched
 worldwide.

     General and administrative expenses for the three month period ending
 September 30, 1998, decreased to $40,868, as compared to $45,700 for the
 three month period ending September 30, 1997.  This decrease is primarily
 due to minor fluctuations in administrative expenses.

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.

 On September 14, 1998, the Company filed an 8-K disclosing that the Company
 had determined to change its fiscal year from a June 30 year end to a
 September 30 year end beginning with the fiscal year ended September 30, 1999.


     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 13, 1998

                         By: /s/ J. W. Linehan                     
                              J. W. Linehan, Chief
                              Executive Officer and
                              Chief Accounting Officer