---

|UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWASHINGTON,
D.C. 20549


FORM 10-Q


(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 29, 2002


OR
|---------------------------------------------------

||_| |  | Transition
Report Pursuant to Section 13 or 15(d) of the securities Exchange Act of 1934
|--- |  | ----------------------------------------------------------------------------------------

|For the transition
period from ______________ to ________________


Commission File Number
0-1298


ADVANCED TECHNICAL
PRODUCTS, INC.(Exact name of Issuer as Specified in Its Charter)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware(State or Other Jurisdiction ofIncorporation or Organization) | 11-1581582(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

|200 Mansell Ct. East,
Suite 505, Roswell, Georgia 30076 (Address of Principal
Executive Offices)


(770) 993-0291(Issuers
Telephone Number, Including Area Code)


(Former Address, if
Changed Since Last Report)


Indicate by check mark
whether the Registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act during the past 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 |_|
|------- | ------

|The aggregate number of
shares of Common Stock outstanding as of May 10, 2002 was 5,890,064.
|--------------------------------------------------------------------------------------------

|ADVANCED
TECHNICAL PRODUCTS, INC.


INDEX
|-----------------------------------------

|PART I.  |  | FINANCIAL INFORMATION                                                   |  |    | 
|-------- |  | ----------------------------------------------------------------------- |  | -- | 
|        
|Item 1.  |  | Financial Statements (unaudited)                                        |  | 3  | 
|        
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results | 
|         |  | of Operations                                                           | 
|        
|         |  | Discontinued Operations                                                 |  | 12 | 
|         |  | Results of Operations                                                   |  | 12 | 
|         |  | Financial Condition and Liquidity                                       |  | 14 | 
|         |  | Recent Accounting Pronouncements                                        |  | 16 | 
|         |  | Forward Looking Statements - Cautionary Factors                         |  | 16 | 
|        
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk              |  | 16 | 
|        
|PART II. |  | OTHER INFORMATION                                                       | 
|        
|Item 1.  |  | Legal Proceedings                                                       |  | 17 | 
|        
|Item 2.  |  | Changes in Securities and Use of Proceeds                               |  | 18 | 
|        
|Item 3.  |  | Defaults Upon Senior Securities                                         |  | 18 | 
|        
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                     |  | 18 | 
|        
|Item 5.  |  | Other Information                                                       |  | 19 | 
|        
|Item 6.  |  | Exhibits and Reports on Form 8-K                                        |  | 19 | 

|ADVANCED TECHNICAL
PRODUCTS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED
BALANCE SHEETS
AS OF MARCH 29, 2002
AND DECEMBER 31, 2001


(UNAUDITED, IN
THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                             | March 29,2002 | December 31,2001
|-------------------------------------------------------------------------------------------- | ------------- | ----------------
|ASSETS                                                                                       |               |                 
|                                                                                             |              
|CURRENT ASSETS:                                                                              |              
|Cash and cash equivalents                                                                    |               | $     1,178     
|Accounts receivable (net of allowance for doubtful accounts of $361 and $306 at              |              
|March 29, 2002 and December 31, 2001, respectively)                                          |               | 24,061          
|Inventories and costs relating to long-term contracts and programs in                        |              
|process, net of progress payments                                                            |               | 53,196          
|Prepaid expenses and other current assets                                                    |               | 2,151           
|Deferred income taxes                                                                        |               | 2,794           
|                                                                                             |               |                 
|Total current assets                                                                         |               | 83,380          
|                                                                                             |               |                 
|                                                                                             |              
|NONCURRENT ASSETS:                                                                           |              
|Property, plant and equipment                                                                |               | 25,334          
|Less-accumulated depreciation                                                                |               | (14,196         
|                                                                                             |               |                 
|Net property, plant and equipment                                                            |               | 11,138          
|                                                                                             |               |                 
|                                                                                             |              
|Deferred income taxes                                                                        |               | 1,105           
|Net assets of discontinued operations                                                        |               | 1,514           
|Other noncurrent assets                                                                      |               | 3,731           
|                                                                                             |               |                 
|Total assets                                                                                 |               | $ 100,868       
|                                                                                             |               |                 
|                                                                                             |              
|LIABILITIES AND SHAREHOLDERS EQUITY                                                         |              
|                                                                                             |              
|CURRENT LIABILITIES:                                                                         |              
|Accounts payable                                                                             |               | $   14,334      
|Accrued expenses                                                                             |               | 11,864          
|Short-term debt                                                                              |               | 22,200          
|                                                                                             |               |                 
|Total current liabilities                                                                    |               | 48,398          
|                                                                                             |              
|LONG-TERM LIABILITIES:                                                                       |              
|Long-term debt, net of current portion                                                       |               | 14,194          
|Other liabilities                                                                            |               | 4,722           
|                                                                                             |               |                 
|Total liabilities                                                                            |               | 67,314          
|                                                                                             |              
|SHAREHOLDERS EQUITY:                                                                        |              
|Preferred stock, undesignated, 1,000,000 shares authorized, no shares issued and outstanding |               |                
|Common stock, $.01 par value, 30,000,000 shares authorized, 5,880,997 shares and 5,841,739   |              
|shares issued and outstanding as of March 29, 2002 and December 31, 2001, respectively       |               | 58              
|Additional paid-in capital                                                                   |               | 20,291          
|Retained earnings                                                                            |               | 14,340          
|Accumulated other comprehensive loss                                                         |               | (541            
|                                                                                             |               |                 
|                                                                                             |               | 34,148          
|Less: Common stock purchased by deferred compensation trust (85,525 shares and 89,000 shares |              
|as of March 29, 2002 and December 31, 2001, respectively)                                    |               | (594            
|                                                                                             |               |                 
|Total shareholders equity                                                                   |               | 33,554          
|                                                                                             |               |                 
|Total liabilities and shareholders equity                                                   |               | $ 100,868       
|                                                                                             |               |                 

|See accompanying Notes
to Condensed Consolidated Financial Statements.
3
|------------------------------------------------------------------------

|ADVANCED
TECHNICAL PRODUCTS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE
QUARTERS ENDED MARCH 29, 2002 AND MARCH 30, 2001


(UNAUDITED,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | 2002 | 2001     
|-------------------------------------------- | ---- | ---------
|Revenues                                     |      | $49,996  
|                                             |     
|Cost of revenues                             |      | 38,442   
|                                             |     
|General and administrative expenses          |      | 7,179    
|                                             |      |          
|Operating income                             |      | 4,375    
|                                             |     
|Interest expense                             |      | 682      
|Other expense                                |      | 20       
|                                             |      |          
|                                             |     
|Income before income tax expense             |      | 3,673    
|                                             |     
|Income tax expense                           |      | 1,414    
|                                             |      |          
|Net Income                                   |      | $  2,259 
|                                             |      |          
|                                             |     
|Net income per share:                        |     
|Basic                                        |      | $    0.39
|                                             |      |          
|                                             |     
|Diluted                                      |      | $    0.36
|                                             |      |          
|                                             |     
|Weighted average number of common and common |     
|equivalent shares outstanding:               |     
|Basic                                        |      | 5,766    
|                                             |      |          
|Diluted                                      |      | 6,222    
|                                             |      |          

|See accompanying Notes
to Condensed Consolidated Financial Statements.
4
|------------------------------------------------------------------------

|ADVANCED
TECHNICAL PRODUCTS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE
QUARTERS ENDED MARCH 29, 2002 AND MARCH 30, 2001


(UNAUDITED,
IN THOUSANDS)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                    | 2002 | 2001    
|------------------------------------------------------------------- | ---- | --------
|CASH FLOWS FROM OPERATING ACTIVITIES:                               |      |         
|Net income                                                          |      | $ 2,259 
|Adjustments to reconcile net income to net cash provided by         |     
|operating activities:                                               |     
|Depreciation and amortization                                       |      | 722     
|Expense resulting from appreciation of Company stock held           |     
|in deferred compensation trust                                      |      | 805     
|Other non-cash charges                                              |      | 143     
|Changes in operating assets and liabilities:                        |     
|Accounts receivable                                                 |      | 1,777   
|Inventories                                                         |      | 1,151   
|Accounts payable                                                    |      | (5,577  
|Accrued expenses                                                    |      | (311    
|Net assets of discontinued operations                               |      | (195    
|Other assets and liabilities                                        |      | 314     
|                                                                    |      |         
|Net cash provided by operating activities                           |      | 1,088   
|                                                                    |      |         
|                                                                    |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                               |     
|Capital expenditures                                                |      | (954    
|Net investing activities of discontinued operations                 |      |        
|                                                                    |      |         
|Net cash used in investing activities                               |      | (954    
|                                                                    |      |         
|                                                                    |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                               |     
|Repayments of borrowings                                            |      | (914    
|Proceeds from exercise of stock options and warrants                |      | 303     
|Common stock issued under employee stock purchase plan              |      | 32      
|Cash dividends paid                                                 |      |        
|Payments under capital lease obligations                            |      | (12     
|Net sale / purchase of common stock for deferred compensation trust |      | 86      
|Net financing activities of discontinued operations                 |      |        
|                                                                    |      |         
|Net cash used in financing activities                               |      | (505    
|                                                                    |      |         
|                                                                    |     
|NET DECREASE IN CASH AND CASH EQUIVALENTS                           |      | (371    
|                                                                    |     
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                      |      | 1,549   
|                                                                    |      |         
|                                                                    |     
|CASH AND CASH EQUIVALENTS, END OF PERIOD                            |      | $ 1,178 
|                                                                    |      |         
|                                                                    |     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                   |     
|Cash paid for interest                                              |      | $    558
|Cash paid for income taxes                                          |      | $ 1,393 

|See accompanying Notes
to Condensed Consolidated Financial Statements.
5
|------------------------------------------------------------------------

|ADVANCED
TECHNICAL PRODUCTS, INC.AND
SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)


1.     BASIS OF
PRESENTATION


The
accompanying unaudited Condensed Consolidated Financial Statements of Advanced
Technical Products, Inc. and Subsidiaries (the Company or
ATP) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the quarter ended March 29, 2002 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2002. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Form 10-K for the year ended
December 31, 2001.


2.
     DISCONTINUED OPERATIONS


On
June 30, 2000, the Company adopted a formal plan to sell its Structural Core
Materials segment, which consisted of the operations of its Alcore and Alcore
Brigantine S.A. subsidiaries. On June 14, 2001, the Company completed the sale
of certain assets of Alcore and 100% of the stock of the Alcore Brigantine S.A.
subsidiary (the Transaction) to a subsidiary of the M.C. Gill
Corporation. The Alcore assets sold consisted primarily of inventories and
property and equipment. The selling price was approximately $5.0 million in the
form of cash and a promissory note. Excluded from the Transaction were accounts
receivable, the Belcamp, Maryland manufacturing facility and substantially all
the liabilities of Alcore. The Company is currently seeking a buyer for its
Belcamp facility, but to date the Company has not entered into any agreement or
arrangement with any third party to purchase the facility.


The
promissory note from the Alcore buyer totals $1,250,000 in principal, and is to
be paid as follows: $500,000 on June 13, 2002, $375,000 on December 13, 2002 and
$375,000 on June 13, 2003. In addition, payments are to include accrued interest
on the unpaid note balance at the rate of 9% per annum. The note has been
classified with assets of continuing operations in the accompanying Condensed
Consolidated Balance Sheets.


The
remaining net assets of discontinued operations at March 29, 2002 following the
Transaction consist primarily of the Belcamp manufacturing facility and reserves
for other liabilities relating to discontinued operations. Net assets to be
disposed of have been separately classified in the accompanying Condensed
Consolidated Balance Sheets.


Net
revenues of the Structural Core Materials segment were zero and approximately
$6.5 million for the quarters ended March 29, 2002 and March 30, 2001,
respectively. These amounts are not included in revenues in the accompanying
Condensed Consolidated Statements of Operations.
6
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.     INVENTORIES


Inventories
at March 29, 2002 and December 31, 2001 consisted of the following (in
thousands):
|-------------------------------------------------------------------------------------------------------------------

|                  | March 29,2002 | Dec. 31,2001
|----------------- | ------------- | ------------
|Finished goods    |               | $      991  
|Work in process   |               | 39,319      
|Raw materials     |               | 21,170      
|Progress payments |               | (8,284      
|                  |               |             
|Total inventories |               | $ 53,196    
|                  |               |             

## 4.     DEBT

Debt
is summarized as follows (in thousands):

|                                            | March 29,2002 | Dec. 31,2001
|------------------------------------------- | ------------- | ------------
|Short-term debt:                            |               |             
|Revolving loans                             |               | $17,088     
|Current portion of long-term debt           |               | 5,112       
|                                            |               |             
|                                            |               | $22,200     
|                                            |               |             
|Long-term debt:                             |              
|Term loans                                  |               | $11,870     
|Equipment loans                             |               | 1,398       
|Subordinated debt, net of  unamortized loan |              
|discount                                    |               | 6,038       
|                                            |               |             
|Total long-term debt                        |               | 19,306      
|Less current portion                        |               | 5,112       
|                                            |               |             
|Long-term debt, net of current portion      |               | $14,194     
|                                            |               |             

|Revolving, Term and
Equipment Loans


On
October 10, 2000, the Company entered into a new financing agreement with its primary
lender. At March 29, 2002, the Companys credit facility with this lending institution
totaled $40.3 million consisting of: (1) $27.0 million of revolving credit against
eligible receivable and inventory balances, (2) a $11.9 million term loan and (3) a $1.4
million capital equipment loan. As of March 29, 2002, the Company had approximately $9.2
million of unused borrowing availability on this credit facility, net of $1.3 million of
reserves against the revolving loan borrowing base for outstanding stand-by letters of
credit commitments ($0.8 million) and other items ($0.5 million).


The
revolving, term and equipment loans are secured by substantially all of the Companys
assets. The interest rates on the loans are set quarterly based on the Companys
performance against debt-to-earnings ratios specified in the loan agreement. Interest
rates can range from LIBOR (the London Interbank Offered Rates) plus 2.75% to LIBOR plus
1.0% on the revolving loan and from LIBOR plus 3.25% to LIBOR plus 1.5% on the term and
equipment loans. Alternatively, the Company may elect interest rates based on the lending
institutions prime rate with rates on the revolving loan ranging from prime plus 0.5% to
prime plus 0.25% and rates on the term and equipment loans ranging from prime plus 0.75%
to prime plus 0.50%.
7
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Interest
is paid monthly in arrears on all loans. The term loan is payable quarterly based on a
seven-year amortization period. Equipment loan principal payments are made monthly based
on a five-year amortization period. The agreement also stipulates that the Company will
make annual mandatory prepayments of the term loan principal in an amount equal to 40% of
annual excess cash flow, as defined by the agreement. Such prepayments are generally due
within ninety days of the end of the year, commencing with the year ending December 31,
2001. The prepayment requirement based on excess cash flow for 2001 was $1.5 million,
which has been classified as short-term debt in the Companys Condensed Consolidated
Balance Sheet at March 29, 2002. The $1.5 million prepayment was made on May 10, 2002.
The credit facility matures on October 31, 2003.


Subordinated Debt


On
October 10, 2000, the Company entered into an agreement with a lender for a three year,
$7,000,000 million loan in the form of a junior secured credit facility. The loan bears
interest payable monthly in arrears at an annual rate of 12.5%, and an additional 2.5% of
payment-in-kind interest that is payable currently or at maturity, at the Companys
discretion. The loan matures on October 31, 2003. In connection with the loan, ATP also
issued warrants giving the lender the right to purchase 320,000 shares of the Companys
common stock at an exercise price of $4.42 per share. The warrant agreement provided the
lender the right, under certain circumstances, to require the Company to repurchase the
warrants for an amount to be determined based on the Companys financial performance,
subject to a maximum cap of $1,750,000.


The
Company allocated the $7,000,000 proceeds from the loan to the subordinated debt
($5,250,000) and stock warrants ($1,750,000) based on their respective fair values. The
fair value of the stock warrants is reflected as a debt discount and is being amortized
as interest expense over the three year life of the debt using the interest method. On
October 31, 2001, the lender exercised all of the 320,000 stock warrants issued in
connection with the loan. In lieu of paying the exercise price to the Company in cash,
the lender elected to convert the warrants on a cashless basis in accordance with the
provisions of the agreement. As a result, the Company issued 266,807 new shares of its
common stock to the lender and ATP received no cash proceeds from the exercise. The
lender subsequently sold all of these shares on the public market.



5.     EARNINGS
PER SHARE


Earnings
per share (EPS) are calculated as follows (in thousands):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              | March 29,2002 | March 30,2001
|--------------------------------------------- | ------------- | -------------
|Net income (loss)                             |               | $2,259       
|Less:  preferred stock dividends accrued      |               |             
|                                              |               |              
|Net income (loss) available for common shares |               | $2,259       
|                                              |               |              
|Weighted average number of common shares      |              
|outstanding:                                  |              
|Basic                                        |               | 5,766        
|Add: assumed stock conversions, net of        |              
|assumed treasury stock purchases:             |              
|--stock options                               |               | 455          
|--stock warrants                              |               | 1            
|                                              |               |              
|Diluted                                      |               | 6,222        
|                                              |               |              

|8
|-

|6.     SEGMENT
REPORTING


Segment
financial information is summarized as follows (in thousands):
|-------------------------------------------------------------------------------------------------

|                                        | Quarter  Ended
|--------------------------------------- | --------------
|
|Revenues (all from external customers): |               
|Aerospace and Defense                   |               
|Commercial Composites                   |               
|Other operating segments                |               
|                                        |               
|Total                                   |               
|                                        |               
|Operating income (loss):                |               
|Aerospace and Defense                   |               
|Commercial Composites                   |               
|Other operating segments                |               
|Corporate                               |               
|                                        |               
|Total                                   |               
|                                        |               

|7.
     COMPREHENSIVE INCOME


The
Company applies the provisions of SFAS No. 130, Reporting Comprehensive
Income, which requires the reporting of other comprehensive income in
addition to net income from operations. The Companys other comprehensive
loss for the quarter ended March 30, 2001 totaled $86,000 and consisted of
foreign currency translation adjustments. There was no other comprehensive loss
for the quarter ended March 29, 2002. Comprehensive income totaled $2,259,000
and $1,485,000 for the quarters ended March 29, 2002 and March 30, 2001,
respectively.


8.
     CONTINGENCIES


On
October 7, 1999, the New York Office of the Attorney General, on behalf of the
New York State Department of Environmental Conservation (NYSDEC),
sent a letter to the Company, claiming that the Companys Lunn Industries
division (Lunn) is a potentially responsible party (PRP)
with respect to contamination at the Babylon Landfill in Babylon, New York.
NYSDEC alleges that Lunn sent waste to the Babylon Landfill and that Lunn is
jointly and severally liable under the Comprehensive Environmental Response,
Compensation and Liability Act for NYSDECs response costs in addition to
interest, enforcement and future costs. According to NYSDEC, there are currently
13 PRPs identified for the Babylon Landfill. NYSDEC documents indicate that Lunn
did transmit waste to the Babylon Landfill, although it is currently unclear to
what extent Lunn contributed to contamination of the landfill. Accordingly, the
Company cannot at present determine the extent of its liability, if any. The
Company has not recorded any liability for the contingency as of March 29, 2002.


During
January 2000, the Company learned of possible accounting and financial reporting
irregularities at its subsidiary, Alcore, when certain financial records were
seized in connection with a search warrant issued by the United States District
Court  District of Maryland as part of a governmental investigation.
Additionally, in January 2000, the Company was notified of an investigation by
the United States Securities and Exchange Commission (SEC) regarding
these matters.
9
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
July 23, 2001, the United States Attorney for the District of Maryland unsealed
a criminal indictment against Alcores former chief executive officer
(CEO), alleging that he engaged in securities fraud and other
offenses. A criminal information was also filed by the United States Attorney
against Alcores former chief financial officer, who pleaded guilty on
October 4, 2001, to one count of conspiracy to make false statements.
Simultaneously, the SEC filed a civil complaint against the two individuals,
alleging securities fraud and other offenses. The employment of these
individuals was terminated by the Company in March 2000. Alcore was sold by the
Company in June 2001. The Company retained Alcores liabilities, including
any liabilities associated with the Governments investigations. Neither
the Company nor Alcore was named as a defendant in the proceedings brought
against the two individuals by the U.S. Attorney and the SEC.


In
June 2001, the Company was notified by the SEC staff that it is evaluating
whether to recommend that the SEC bring an action against the Company and
members of its management for violations of the antifraud and other provisions
of the federal securities laws based on failure to discover the activities at
Alcore referred to above. In July 2001, the Company, James Carter, a former
Chairman and CEO of the Company and a current director of the Company, and
Garrett Dominy, the current CEO and a director of the Company, each made
so-called Wells submissions to the SEC stating why they believe that
they should not be charged with violations of the federal securities laws in
connection with the Alcore investigation. Additional submissions were made in
September and October of 2001 and February of 2002. On April 30, 2002, the
Company, Mr. Dominy and Mr. Carter submitted Offers of Settlement to the SEC
which, if accepted, would end the SECs investigation with the entry of
administrative orders that the Company, Mr. Dominy and Mr. Carter cease and
desist from committing or causing any violation or future violation of Exchange
Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and Rules 12b-20, 13a-1
and 13a-13 thereunder, all relating to corporate books and records and internal
controls. There is no assurance that the Offers of Settlement will be accepted
by the SEC. Based on information currently available, however, the Company
believes that the SECs investigation will not have a material adverse
impact on its financial position or future results of operations.


The
Company and certain of its Officers and Directors have been named in a number of
lawsuits filed during July 2000 in the United States District Court for the
Northern District of Georgia. During October 2000, the lawsuits were
consolidated and in January 2001, an amended complaint was filed. The
consolidated lawsuit asserts securities fraud claims based on, among other
things, alleged misstatements and omissions concerning the Companys 1998
and 1999 financial results and condition, including various violations of
generally accepted accounting principles. The lawsuit purports to be brought on
behalf of a class consisting of all persons who purchased the Companys
common stock in the period from April 1998 through April 2000. During January
2002, a memorandum of understanding (MOU) was entered into by the
Company and plaintiffs counsel outlining terms and conditions for
settlement of the suit. The MOU provides for a settlement amount of $2,950,000,
$983,000 of which would be paid by the Company and $1,967,000 of which would be
paid by the Companys insurance carrier. The settlement is subject to
notice to the class, approval by the court and other conditions. If final court
approval is received and payment is made, the Company will be released from all
further claims held or made by the shareholder class with respect to matters
raised in the suit. Court approval is anticipated in the third quarter of 2002.
The Companys portion of the settlement was accrued during the fourth
quarter of 2001.
10
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9.     SUBSEQUENT
EVENT


On
May 2, 2002, ATP announced that it had entered into an Agreement and Plan of
Merger dated as of May 2, 2002 (the Merger Agreement ), with General
Dynamics Corporation, a Delaware corporation (General Dynamics) and
Athena Acquisition I Corporation (the Merger Subsidiary), a Delaware
corporation and wholly owned subsidiary of General Dynamics. The Companys
board of directors unanimously approved the Merger Agreement and its submission
to stockholders. Under the Merger Agreement, upon consummation of the merger,
each outstanding share of ATPs common stock will be converted into the
right to receive $33.50 in cash, without interest. The Merger Agreement provides
for the merger of Merger Subsidiary with and into the Company, with the Company
as the surviving corporation. The merger is conditioned upon, among other
things: (i) approval by the holders of the Companys common stock, (ii)
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and (iii) other customary closing conditions. Since the board of
directors unanimously approved the Merger Agreement, the provisions of the
Rights Agreement dated as of March 3, 2000, between the Company and American
Stock Transfer & Trust Company will not be applicable to the execution of
the Merger Agreement or the closing of the related merger. The merger is
expected to close by the end of June 2002.
11
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations


The
following discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto included elsewhere
herein.



Discontinued
Operations


On
June 30, 2000, the Company adopted a formal plan to sell its Structural Core Materials
segment, which consists of the operations of the Alcore, Inc. and Alcore Brigantine S.A.
subsidiaries. See Note 2 of the Condensed Consolidated Financial Statements of the
Company.



Results of
Operations


During
2002, the Company incurred certain non-operating charges relating to legal costs
primarily associated with an investigation by the SEC and non-cash expenses
relating to appreciation in the market value of Company common stock held in
trust by the ATP Deferred Compensation Plan. The Company has amended the plan so
that, commencing with the second quarter of 2002, no further income statement
impact will result from future changes in the price of the Companys shares
held in the trust. During 2001, the Company incurred non-operating legal costs
associated with the SEC investigation. Following is a reconciliation of
operating results as reported using Generally Accepted Accounting Principles
(GAAP) to Pro Forma reporting to exclude the aforementioned
non-operating and non-cash charges (in thousands, except per share amounts):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | NetRevenues | OperatingIncome | IncomeBefore IncomeTax Expense | NetIncome | DilutedEPS
|-------------------------------- | ----------- | --------------- | ------------------------------ | --------- | ----------
|First Quarter  2002             |             |                 |                                |           |           
|GAAP Reporting                   |             | $49,996         |                                | $4,375    |           
|Pro Forma Adjustments:           |            
|Legal costs of investigation     |             |                |                                |          |           
|Non-cash expense relating to     |            
|appreciation in value of Company |            
|common stock held in connection  |            
|with deferred compensation plan  |             |                |                                | 805       |           
|                                 |             |                 |                                |           |           
|Pro Forma Reporting              |             | $49,996         |                                | $5,180    |           
|                                 |             |                 |                                |           |           
|                                 |            
|First Quarter  2001             |            
|                                 |             |                 |                                |           |           
|GAAP Reporting                   |             | $42,342         |                                | $3,854    |           
|Pro Forma Adjustments:           |            
|Legal costs of investigation     |             |                |                                |          |           
|                                 |             |                 |                                |           |           
|                                 |             |                 |                                |           |           
|Pro Forma Reporting              |             | $42,342         |                                | $3,854    |           
|                                 |             |                 |                                |           |           

|12
|--

|Quarter Ended March 29, 2002
Compared with the Quarter Ended March 30, 2001


Revenues
for the quarter ended March 29, 2002 increased $7.7 million compared to the
quarter ended March 30, 2001, or 18.1%, from $42.3 million in 2001 to $50.0
million in 2002. The increase in revenues was primarily attributable to
increased sales on Aerospace and Defense programs, including ongoing programs
for advanced composite components and shelter systems.


Gross
profit as a percentage of revenues was 23.1% in the first quarter of 2002,
compared to 22.3% in the first quarter of 2001. The increase was primarily
attributable to improved profitability resulting from a more favorable mix of
sales.


General
and administrative expenses increased $1.6 million, or 28.4% from $5.6 million
in 2001 to $7.2 million in 2002. General and administrative expenses for the
first quarter of 2002 include non-cash charges of $0.8 million relating to
increases in deferred compensation obligations resulting from the appreciation
during the quarter in the market value of Company common stock held in a rabbi
trust pursuant to the terms of the ATP Deferred Compensation Plan. Although
management believes that the Company has no real economic exposure to these
non-cash gains or losses associated with changes in the deferred compensation
obligation resulting from market value fluctuations of shares of its common
stock held in the rabbi trust for participants in the Plan, in accordance with
Issue No. 97-14, Accounting for Deferred Compensation Arrangements Where
Amounts Earned Are Held in a Rabbi Trust and Invested(EITF No.
97-14), as published by the Emerging Issues Task Force of the
Financial Accounting Standards Board, the shares of Company stock held in the
rabbi trust are accounted for as treasury stock, and accordingly general and
administrative expense includes adjustments to reflect the elimination of market
value increases in the shares of Company stock held in the rabbi trust. In
addition, the Company has amended the Plan to require investments in Company
stock to be settled with Company stock so that, commencing with the second
quarter of 2002, no further income statement impact will result from future
changes in the price of the Companys shares held in the rabbi trust.
Excluding the non-cash charges, general and administrative expenses increased by
$0.8 million, and, as a percentage of revenues, decreased from 13.2% in 2001 to
12.7% in 2002. The increase in general and administrative dollar expense,
excluding the non-cash charges, is primarily the result of increased independent
research and development spending and bid and proposal costs. The reduction of
general and administrative expenses as a percentage of revenues is attributable
to the increased revenues in 2002 compared to 2001.


Operating
income was $4.4 million, or 8.8% of sales, for the first quarter of 2002,
compared to $3.9 million, or 9.1% of sales, for the first quarter of 2001.
Excluding the non-cash general and administrative expenses of $0.8 million
relating to the market value increases in Company stock held by the deferred
compensation trust discussed above, operating income increased $1.3 million for
the first quarter of 2002 compared to 2001, or 34.4%, primarily because of the
combination of increased revenues and gross profits, partially offset by the
increased general and administrative expenses.


Interest
expense in 2002 decreased $297,000 for the first quarter, from $979,000 in 2001
to $682,000 in 2002, the result of lower interest-bearing debt balances and
lower interest rates in effect during 2002 compared to the same period of 2001.


Other
expense consists of certain legal and other costs incurred in connection with
the Companys governmental investigations relating to Alcore and a class
action shareholder lawsuit. Other expense decreased from $321,000 in 2001 to
$20,000 in 2002, reflecting a reduction in investigation-related activities
during 2002 compared to 2001.


Income
taxes increased $431,000 for the quarter, reflecting the relative change in
income before taxes. The effective income tax rate for continuing operations was
38.5% for each period reported.
13
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Financial
Condition and Liquidity


Cash
flow provided by operations was $1.1 million for the first quarter of 2002
compared to $2.1 million for the same period in 2001. Working capital, excluding
short-term debt balances, increased $1.8 million in the first quarter of 2002 to
$57.2 million. Changes in working capital during the quarter ended March 29,
2002 included: (1) a decrease of $2.2 million in accounts receivable, resulting
primarily from an increase in collections on customer accounts and a decrease in
revenues in the first quarter of 2002 compared to the fourth quarter of 2001,
(2) a decrease of $5.9 million in accounts payable and accrued expenses,
reflecting an increase in payments to suppliers and income tax payments, (3) a
decrease of $1.2 million in inventories, primarily the result of an increase in
progress payments received during the first quarter of 2002 on customer
contracts and (4) a decrease of $0.7 million in other working capital
components. Net cash used in investing activities totaled $1.0 million in the
first quarter of 2002 and resulted exclusively from capital expenditures.


The
Companys primary loan agreement includes a total credit facility of $40.3
million at March 29, 2002 consisting of: (1) $27.0 million of revolving credit
against eligible receivable and inventory balances, (2) a $11.9 million term
loan and (3) a $1.4 million capital equipment loan. As of March 29, 2002, the
Company had approximately $9.2 million of unused borrowing availability on this
credit facility, net of $1.3 million of reserves against the revolving loan
borrowing base for outstanding stand-by letters of credit commitments ($0.8
million) and other items ($0.5 million). The revolving, term and equipment loans
are secured by substantially all of the Companys assets. The interest
rates on the loans are set quarterly based on the Companys performance
against debt-to-earnings ratios specified in the loan agreement. Interest rates
can range from LIBOR (the London Interbank Offered Rates) plus 2.75% to LIBOR
plus 1.0% on the revolving loan and from LIBOR plus 3.25% to LIBOR plus 1.5% on
the term and equipment loans. Alternatively, the Company may elect interest
rates based on the lending institutions prime rate with rates on the
revolving loan ranging from prime plus 0.5% to prime plus 0.25% and rates on the
term and equipment loans ranging from prime plus 0.75% to prime plus 0.50%.
Interest is paid monthly in arrears on all loans. The term loan is payable
quarterly based on a seven-year amortization period. Equipment loan principal
payments are made monthly based on a five-year amortization period. The
agreement also stipulates that the Company will make annual mandatory
prepayments of the term loan principal in an amount equal to 40% of annual
excess cash flow, as defined by the agreement. Such prepayments are generally
due within ninety days of the end of the year, commencing with the year ending
December 31, 2001. The prepayment requirement based on excess cash flow for 2001
was $1.5 million, which has been classified as short-term debt in the
Companys Condensed Consolidated Balance Sheet at March 29, 2002. The $1.5
million prepayment was made on May 10, 2002. The credit facility matures on
October 31, 2003.


On
October 10, 2000, the Company entered into an agreement with a lender for a
three year, $7,000,000 million loan in the form of a junior secured credit
facility. The loan bears interest payable monthly in arrears at an annual rate
of 12.5%, and an additional 2.5% of payment-in-kind interest that is payable
currently, or at maturity at the Companys discretion. The loan matures on
October 31, 2003. In connection with the loan, ATP also issued warrants giving
the lender the right to purchase 320,000 shares of the Companys common
stock at an exercise price of $4.42 per share. On October 31, 2001, the lender
exercised all of the 320,000 stock warrants issued in connection with the loan.
In lieu of paying the exercise price to the Company in cash, the lender elected
to convert the warrants on a cashless basis in accordance with the provisions of
the warrant agreement. As a result, the Company issued 266,807 new shares of its
common stock to the lender and ATP received no cash proceeds from the exercise.
The lender subsequently sold all of these shares on the public market.


At
March 29, 2002, the Companys backlog of orders and long-term contracts was
approximately $712 million, compared to $714 million and $561 million at
December 31, 2001 and March 30, 2001, respectively. The backlog includes firm
released orders of approximately $230 million, $199 million and $175 million at
March 29, 2002, December 31, 2001 and March 30, 2001, respectively. Released
backlog represents the estimated value of contracts for which ATP is authorized
to incur costs, but for which revenue has not yet been recognized. The released
backlog consists of firm contracts, and although they can be and sometimes are
modified or terminated, the amount of modifications and terminations
historically has been limited compared to total contract volume. The increase in
backlog at March 29, 2002 compared to March 30, 2001 reflects increased orders
received for biological and chemical detection and protection systems, military
shelters and components on several advanced composites programs.
14
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|As
discussed above, the Company has made capital expenditures totaling $1.0 million
during the first quarter of 2002, which have been financed by increased
borrowings under the revolving loan portion of the Companys credit
facility. Management believes that future short-term capital spending
requirements will be limited to a sustaining maintenance level plus expenditures
that will be cost justified by anticipated incremental program revenues.
However, the Company will consider other future capital expenditure investments
beyond the maintenance level when such investments are deemed to be strategic or
in the best interests of the Company and its stockholders.


Management
of ATP believes that cash flows from operations, available borrowings under its
current credit facility and the additional subordinated financing obtained
during October 2000 are adequate to sustain the Companys current operating
level and expected growth for the next one to three years. However, should
circumstances arise affecting cash flow or requiring capital expenditures beyond
those anticipated by the Company, there can be no assurance that such funds will
be available on commercially reasonable terms, if at all.


On
May 2, 2002, ATP announced that it had entered into an Agreement and Plan of
Merger dated as of May 2, 2002 (the Merger Agreement), with General
Dynamics Corporation, a Delaware corporation (General Dynamics) and
Athena Acquisition I Corporation (the Merger Subsidiary), a Delaware
corporation and wholly owned subsidiary of General Dynamics. The Companys
board of directors unanimously approved the Merger Agreement and its submission
to stockholders. Under the Merger Agreement, upon consummation of the merger,
each outstanding share of ATPs common stock will be converted into the
right to receive $33.50 in cash, without interest. The Merger Agreement provides
for the merger of Merger Subsidiary with and into the Company, with the Company
as the surviving corporation. The merger is conditioned upon, among other
things: (i) approval by the holders of the Companys common stock, (ii)
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and (iii) other customary closing conditions. Since the board of
directors unanimously approved the Merger Agreement, the provisions of the
Rights Agreement dated as of March 3, 2000, between the Company and American
Stock Transfer & Trust Company will not be applicable to the execution of
the Merger Agreement or the closing of the related merger. The merger is
expected to close by the end of June of this year. However, there can be no
assurance that the merger will be completed.


The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, income and expenses, and
disclosure of contingent assets and contingent liabilities at the date of the
financial statements and during the reporting period. Actual results could
differ materially from those estimates.


The
Company believes that inflation has not had a material effect on the results of
its operations in the periods covered by this report.
15
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Recent
Accounting Pronouncements



The Company adopted the provisions
of Statement of Financial Accounting Standard No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142) beginning January 2002. SFAS No. 142
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. SFAS No. 142 also
addresses how goodwill and other intangible assets should be accounted for after
they have been initially recognized in the financial statements. The adoption of
this standard had no material impact upon adoption or on the results of
operations for the quarter ended March 29, 2002.



Forward
Looking Statements  Cautionary Factors


This
Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are those that do not state
historical fact and are inherently subject to risk and uncertainties. The
forward-looking statements contained herein include, without limitation,
statements about the Companys expectations, beliefs, intentions, or
strategies regarding the future, and are based on current expectations and
information available to the Company. Such forward-looking statements entail
various risks and uncertainties which could cause actual results to differ
materially from those projected in such forward-looking statements. Such risks
and uncertainties, which can cause actual results to differ materially from
those described herein, include the risks and uncertainties associated with the
pending governmental investigations and litigation involving the Company. For
additional information identifying such risks and uncertainties, see the
Companys 2001 Annual Report on Form 10-K (Item 7, under the heading
Factors Affecting Future Operating Results).



Item 3.
Quantitative and Qualitative Disclosures About Market Risk


The
Company is exposed to changes in interest rates primarily relating to its $40.3
million credit facility. However, the carrying value of borrowings under the
credit facility generally approximate fair value due to the variable rate nature
of such borrowings. The interest rates are set quarterly based on the
Companys performance against debt-to-earnings ratios specified in the
agreement. Interest rates can range from LIBOR plus 2.75% to LIBOR plus 1.0% on
the revolving loan and from LIBOR plus 3.25% to LIBOR plus 1.5% on the term and
equipment loans. Alternatively, the Company may elect interest rates based on
the lending institutions prime rate with the revolving loan ranging from
prime plus 0.5% to prime plus 0.25% and the term and equipment loans ranging
from prime plus 0.75% to prime plus 0.50%. At March 29, 2002, the Company had
$30.4 million outstanding under the credit facility at a weighted-average
interest rate of 3.54%.


The
Company has not entered into transactions which subject it to material foreign
currency transaction gains and losses.
16
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II
OTHER
INFORMATION



Item 1.   Legal
Proceedings


On
October 7, 1999, the New York Office of the Attorney General, on behalf of the
New York State Department of Environmental Conservation (NYSDEC),
sent a letter to the Company, claiming that the Companys Lunn Industries
division (Lunn) is a potentially responsible party (PRP)
with respect to contamination at the Babylon Landfill in Babylon, New York.
NYSDEC alleges that Lunn sent waste to the Babylon Landfill and that Lunn is
jointly and severally liable under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) for NYSDECs response
costs in addition to interest, enforcement and future costs. According to
NYSDEC, there are currently 13 PRPs identified for the Babylon Landfill. NYSDEC
documents indicate that Lunn did transmit waste to the Babylon Landfill,
although it is currently unclear to what extent Lunn contributed to
contamination of the landfill. As a PRP, the Company may be required to pay a
portion of the costs of evaluation and cleanup of this site. Lawsuits and claims
involving additional environmental matters may arise from time to time. The New
York Attorney Generals investigation of the inactive CERCLA site in
Babylon, New York is in a preliminary stage, and as a result, management has
based its assessment of potential liability and remediation costs on currently
available facts, the number of PRPs identified, documentation available,
currently anticipated and reasonably identifiable remediation costs, existing
technology, presently enacted laws and regulations and other factors. While the
Company may have rights of contribution or reimbursement under insurance
policies, such issues are not factors in managements estimation of
liability. The Company cannot presently determine the extent of its liability,
if any, however, based on the foregoing factors, management believes that it is
unlikely that the resolution of the matter at the inactive Babylon, New York
site will have a material adverse effect on the Companys consolidated
financial position, results of operations or cash flows. The Company has not
recorded any liability for the contingency as of March 29, 2002.


During
January 2000, the Company learned of possible accounting and financial reporting
irregularities at its subsidiary, Alcore, when certain financial records were
seized in connection with a search warrant issued by the United States District
Court  District of Maryland as part of a governmental investigation.
Additionally, in January 2000, the Company was notified of an investigation by
the United States Securities and Exchange Commission (SEC) regarding
these matters.


On
July 23, 2001, the United States Attorney for the District of Maryland unsealed
a criminal indictment against Alcores former chief executive officer
(CEO), alleging that he engaged in securities fraud and other
offenses. A criminal information was also filed by the United States Attorney
against Alcores former chief financial officer, who pleaded guilty on
October 4, 2001, to one count of conspiracy to make false statements.
Simultaneously, the SEC filed a civil complaint against the two individuals,
alleging securities fraud and other offenses. The employment of these
individuals was terminated by the Company in March 2000. Alcore was sold by the
Company in June 2001. The Company retained Alcores liabilities, including
any liabilities associated with the Governments investigations. Neither
the Company nor Alcore was named as a defendant in the proceedings brought
against the two individuals by the U.S. Attorney and the SEC.
17
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In
June 2001, the Company was notified by the SEC staff that it is evaluating
whether to recommend that the SEC bring an action against the Company and
members of its management for violations of the antifraud and other provisions
of the federal securities laws based on failure to discover the activities at
Alcore referred to above. In July 2001, the Company, James Carter, a former
Chairman and CEO of the Company and a current director of the Company, and
Garrett Dominy, the current CEO and a director of the Company, each made
so-called Wells submissions to the SEC stating why they believe that
they should not be charged with violations of the federal securities laws in
connection with the Alcore investigation. Additional submissions were made in
September and October of 2001 and February of 2002. On April 30, 2002, the
Company, Mr. Dominy and Mr. Carter submitted Offers of Settlement to the SEC
which, if accepted, would end the SECs investigation with the entry of
administrative orders that the Company, Mr. Dominy and Mr. Carter cease and
desist from committing or causing any violation or future violation of Exchange
Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(b)(5) and Rules 12b-20, 13a-1
and 13a-13 thereunder, all relating to corporate books and records and internal
controls. There is no assurance that the Offers of Settlement will be accepted
by the SEC. Based on information currently available, however, the Company
believes that the SECs investigation will not have a material adverse
impact on its financial position or future results of operations.


The
Company and certain of its Officers and Directors have been named in a number of
lawsuits filed during July 2000 in the United States District Court for the
Northern District of Georgia. During October 2000, the lawsuits were
consolidated and in January 2001, an amended complaint was filed. The
consolidated lawsuit asserts securities fraud claims based on, among other
things, alleged misstatements and omissions concerning the Companys 1998
and 1999 financial results and condition, including various violations of
generally accepted accounting principles. The lawsuit purports to be brought on
behalf of a class consisting of all persons who purchased the Companys
common stock in the period from April 1998 through April 2000. During January
2002, a memorandum of understanding (MOU) was entered into by the
Company and plaintiffs counsel outlining terms and conditions for
settlement of the suit. The MOU provides for a settlement amount of $2,950,000,
$983,000 of which would be paid by the Company and $1,967,000 of which would be
paid by the Companys insurance carrier. The settlement is subject to
notice to the class, approval by the court and other conditions. If final court
approval is received and payment is made, the Company will be released from all
further claims held or made by the shareholder class with respect to matters
raised in the suit. Court approval is anticipated in the third quarter of 2002.
The Companys portion of the settlement was accrued during the fourth
quarter of 2001.


ATP
is not a party to any other legal proceedings, other than routine claims and
lawsuits arising in the ordinary course of its business. ATP does not believe
that such claims and lawsuits, individually or in the aggregate, will have a
material adverse effect on the Companys consolidated financial position,
results of operations or cash flows. Compliance with federal, state, local and
foreign laws and regulations pertaining to the discharge of materials into the
environment, or otherwise relating to the protection of the environment, has not
had, and is not anticipated to have, a material adverse effect upon the cash
flows, earnings or competitive position of ATP.



Item 2.  
Changes in Securities and Use of Proceeds


Not
applicable.



Item 3.   Defaults
Upon Senior Securities


Not
applicable.



Item 4.
  Submission of Matters to a Vote of Security Holders


Not
applicable.


18
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 5.  Other
Information


On
May 2, 2002, ATP announced that it had entered into an Agreement and Plan of
Merger dated as of May 2, 2002 (the Merger Agreement), with General
Dynamics Corporation, a Delaware corporation (General Dynamics) and
Athena Acquisition I Corporation (the Merger Subsidiary), a Delaware
corporation and wholly owned subsidiary of General Dynamics. The Companys
board of directors unanimously approved the Merger Agreement and its submission
to stockholders. Under the Merger Agreement, upon consummation of the merger,
each outstanding share of ATPs common stock will be converted into the
right to receive $33.50 in cash, without interest. The Merger Agreement provides
for the merger of Merger Subsidiary with and into the Company, with the Company
as the surviving corporation. The merger is conditioned upon, among other
things: (i) approval by the holders of the Companys common stock, (ii)
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and (iii) other customary closing conditions. Since the board of
directors unanimously approved the Merger Agreement, the provisions of the
Rights Agreement dated as of March 3, 2000, between the Company and American
Stock Transfer & Trust Company will not be applicable to the execution of
the Merger Agreement or the closing of the related merger. The merger is
expected to close by the end of June of this year. However, there can be no
assurance that the merger will be completed.



Item 6.  
Exhibits and Reports on Form 8-K
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (a) |  | Exhibits
| |  | --- |  | --------

| | Not
applicable.
| | ---------------

| |  | (b) |  | Reports
on Form 8-K.
| |  | --- |  | --------------------

| | Current
Report on Form 8-K dated May 2, 2002 reporting under Item 5 Other Events was filed
announcing the Companys entering into the Merger Agreement on May 2, 2002.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19
|--

|SIGNATURES


In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | ADVANCED TECHNICAL PRODUCTS, INC.
 (Registrant)
| |  | -------------------------------------------------------------

|Dated:  May 10, 2002 |  | By:  /S/ James P. Hobt       
James P. Hobt, Chief Financial and AccountingOfficer, Treasurer and Secretary
|-------------------- |  | -------------------------------------------------------------------------------------------------------------------------

|20
|--