GumTech International reports third-quarter results.

PHOENIX--(BUSINESS WIRE)--Nov. 15, 1996--

Company says fourth-quarter orders are exceeding plan

GumTech International Inc., Friday reported financial results for the third quarter and nine month periods ended Sept. 30, 1996.

The nutrient chewing gum manufacturer reported net sales for the quarter of $397,000, vs. $1.6 million for the same period a year ago. The company reported a net loss of $1.6 million, or 34 cents per share, compared with net earnings of $403,534, or 9 cents per share, for the third quarter of 1995.

Jerry Kern, president and chief executive officer, said non-recurring charges of about $700,000 for advertising and research and development negatively affected results for the quarter. Sales declined chiefly because the company needed more time than expected to negotiate and begin fulfilling several large overseas and domestic contracts.

For the nine months, net sales declined to $2.4 million from $3.3 million for the corresponding period last year. The company reported a net loss of $2.2 million, or 52 cents per share, vs. net income of $662,000, or 15 cents per share, for the nine-month period of 1995.

Significant Improvement Noted

"We are experiencing significant improvement in fourth-quarter revenues as we focus on sales and marketing in place of a previous emphasis on manufacturing," said Kern, who joined the company as chief executive officer at the end of the third quarter. "Orders in house to date in the fourth quarter already far exceed our total sales performance for the third quarter."

One order, for $440,000, is the first in an exclusive agreement, signed in September and worth a minimum of $800,000, with Elspar Norge a.s. for distribution of GumTech products in Norway. Elspar is a supplier for Norges Gruppen, a chain that reaches major portions of the Norwegian consumer product market through 2,500 outlets and 900 Shell and Esso Food/Express shops.

Additional significant orders were received in November as part of the company's direct-response advertising program. Based on this gain, Kern said he expected a series of 750 short GumTech infomercials to be aired nationwide in November. This campaign is expected to help significantly to boost retail sales in the fourth quarter.

"Orders to date as a result of the direct-response program have exceeded our expectations," he said.

Another International Boost

GumTech's international sales received another boost after the third quarter ended. The Toho company of Tokyo, already a distributor of the company's Citrus Slim weight-loss product in Japan, agreed to introduce the DentaHealth product in that country. The initial order is worth about $60,000. Shisei Medicine Co., Ltd., of Yokohama distributes GumTech's Chroma Trim II weight-loss product in Japan.

Additional Developments

In other recent developments, GumTech has begun distributing its products to another Safeway division on the East Coast. GumTech products are also in nearly all major drug chains and such supermarket chains as Stop and Shop, Gelsons and Hughes, as well as Certified Grocers, which supplies many independents.

During the third quarter, the company agreed to manufacture, sell and distribute a chewing-gum product containing the hormone DHEA, to be marketed under the Body Ammo brand. The product will be widely available at leading drug, grocery and health food stores. Retail sales are estimated at several million dollars per year. Body Ammo is a leader in DHEA products nationwide.

GumTech will also sell and distribute Body Ammo's other DHEA products, which include a skin cream, an antioxidant product and a bone and joint formula.

Focus on Sales

"Since new management took control of the company, we've negotiated contracts with several major international distributors and we've also increased our distribution to U.S. markets," Kern said. "We've drastically changed the focus of the company from establishing a state-of-the-art plant and preparing to do business, to building a strong marketing and sales operation. In short, the focus of the company has changed from making gum to selling gum."

In the third quarter GumTech entered into a preliminary agreement with two medical doctors, Alvin Shemesh and M. A. Toor, to formulate and market a nutrient chewing gum to relieve allergy symptoms. Shemesh and Toor have been evaluating the use of gum as a delivery system for nutrients and medicants for about 15 years. The doctors also agreed to serve in a clinical testing role for other GumTech products.

Early in the fourth quarter, GumTech named Arthur P. Rozzi field sales manager. Rozzi's background includes more than 15 years of executive sales experience in the food industry.

Prospects Are Good

Midway through the fourth quarter, Kern expressed satisfaction with the company's prospects.

"To date, we're only using 7 percent of our manufacturing capacity," Kern said. "As we expand our domestic and international sales, we expect to increase our production and our financial performance."

GumTech distributes its products to more than 75 percent of the nation's top drugstore chains, including Walgreens, Osco, Thrifty, Sav-On and Payless, where it is steadily increasing sales. The company also enjoys a strong nationwide position in convenience-store chains and health food stores and has entered major supermarket chains.

In addition, GumTech is increasing distribution and further expanding its presence in international markets, including Europe and the Far East.

For more information on GumTech International via facsimile at no cost, simply call 800/PRO-INFO and dial client code 049. -0-

                     GumTech International, Inc.
                  Condensed Statements of Operations
                             (Unaudited)
                           Three months ended      Nine months ended
                                 Sept. 30,              Sept. 30,
                            1996        1995        1996        1995

Net Sales               $  396,757  $1,577,717  $2,441,288  $3,310,542
Cost of Sales              291,153     681,501   1,360,985   1,649,261

  Gross Profit             105,604     896,216   1,080,303   1,661,281

Operating Expenses       1,605,487     281,808   3,229,902     634,006
Research and
 Development               144,551      28,630     195,324      41,022

  Income (Loss) from
   Operations           (1,644,434)    585,778  (2,344,923)    986,253

Other Income (Expense):
  Interest and Other
   Income                   27,714       5,761      73,447      32,221
  Interest Expense         (41,816)    (35,587)   (179,427)    (61,003)
    Total Other Income
     (Expense)             (14,102)    (29,826)   (105,980)    (28,782)

Income (Loss) Before
 Provision for Income
 Taxes                  (1,658,536)    555,952  (2,450,903)    957,471

Provision for Income
 Taxes                          --     152,418    (213,343)    295,424

Net Income (Loss)      $(1,658,536) $  403,534 $(2,237,560) $  662,047

Net Income (Loss) Per
 Share of Common Stock:
  Primary:
    Weighted Average
    Number of Common
    Shares Outstanding   4,879,566   4,392,658   4,278,128   4,392,658

    Net Income (Loss)
    Per Share of
    Common Stock       $     (0.34) $     0.09  $    (0.52) $     0.15

  Diluted:
    Weighted Average
    Number of Common
    Shares Outstanding   4,879,566   4,392,658   4,278,128   4,392,658

    Net Income (Loss)
    Per Share of
    Common Stock       $     (0.34) $     0.09  $    (0.52) $     0.15
-0-
                     GumTech International, Inc.
                       Condensed Balance Sheet
                           Sept. 30, 1996
                             (Unaudited)

ASSETS
Current Assets:
  Cash and cash equivalents                         $ 1,992,093
  Accounts receivable, net of allowance for
   doubtful accounts of $10,567                         631,879
  Inventories                                         1,459,319
  Deferred income taxes                                 215,412
  Prepaid expenses and other                            104,729
    Total Current Assets                            $ 4,403,432

Property and Equipment, at cost:
  Machinery and production equipment                  3,171,269
  Office furniture and equipment                         97,716
  Leasehold improvements                                190,526
  Total Property and Equipment                        3,459,511
  Less accumulated depreciation                        (337,720)
    Net Property and Equipment                        3,121,791

Other Assets:
  Deposits                                              296,028
  Notes receivable                                      336,652
  Restricted Cash                                       103,908
  Other                                                 158,012
    Total Other Assets                                  894,600
    Total Assets                                    $ 8,419,823

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts Payable                                  $   306,241
  Current portion of long-term debt                     210,253
    Total Current Liabilities                           516,494

Long Term Debt, net of current portion above:
  Equipment Lease Obligations                         1,553,756
    Total Long Term Debt                              1,553,756
Commitments and Contingencies                                --
Stockholders' Equity:
  Preferred stock: no par value, 1,000,000
   authorized none issued or outstanding                     --
  Common stock; no par value, 10,000,000
   shares authorized, 4,896,740 shares issued
   and outstanding                                    7,881,060
  Retained Earnings                                  (1,531,487)
    Total Stockholders' Equity                        6,349,573
    Total Liabilities and Stockholders' Equity      $ 8,419,823

CONTACT: GumTech International Inc., Phoenix

Jerry Kern, 602/277-0606

or

The Financial Relations Board, 310/442-0599

Moira Conlon (analyst contact)

Art Bentley (general info)

Steven Seiler (media contact)