Elspar

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-

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