GUMTECH INTERNATIONAL INC \UT\, SB-2, 1996-10-23

GUMTECH INTERNATIONAL INC \UT\
SB-2, 1996-10-23
SUGAR & CONFECTIONERY PRODUCTS

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Filed with the Securities and Exchange Commission on October 23, 1996.
Securities Act Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED

GUM TECH INTERNATIONAL, INC.
(Exact Name of Small Business Issuer
As Specified In Its Charter)

Utah 2067 87-0482806
(State or other jurisdiction (Primary Standard (IRS Employer
of incorporation or Industrial I.D. Number)
organization) Classification Code No.)

4205 North 7th Avenue
Phoenix, AZ 85013
(602) 277-0606
Address, including zip code, and telephone number, in-
cluding area code, of Registrant's principal executive offices)

Gerald N. Kern, Chief Executive Officer
Gum Tech International, Inc.
4205 North 7th Avenue
Phoenix, AZ 85013
(602) 277-0606
(Name, address, including zip code, and telephone
number, including area code, of agent for service)

Copies of all communications to:

Gary A. Agron, Esq.
5445 DTC Parkway, Suite 520
Englewood, CO 80111
(303) 770-7254
(303) 770-7257 (Fax)

Approximate date of commencement of the Offering: As soon as practicable
after the effective date of the Offering.

<PAGE>

If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box: X
----

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box: [ ]
<TABLE>
<CAPTION>

CALCULATION OF REGISTRATION FEE

===============================================================================================================
Proposed
Dollar Proposed Maximum
Title of Each Class Amount To Maximum Aggregate Amount of
of Securities Be Offering Price Offering Registration
to be Registered Registered Per Unit Price Fee
===============================================================================================================

<S> <C> <C> <C> <C>
Common Stock, no
par value 2,874,715 $6.00(1) $17,248,290 $5,227

Total . . . . . . . . . . .. . . . . . . . . . . . . . . . . $17,248,290 $5,227

===============================================================================================================
</TABLE>

(1) Represents the closing price per share of the Registrant's Common Stock on
the National Market of NASDAQ on October 21, 1996.

The Registrant hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

(EXHIBIT INDEX LOCATED ON PAGE OF THIS FILING)

<PAGE>

GUM TECH INTERNATIONAL, INC.

Cross Reference Sheet
<TABLE>
<CAPTION>

Item Caption Location or Caption in Prospectus
---- ------- ---------------------------------

<S> <C> <C>
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus

2. Inside Front and Outside Back Inside Front and Outside Back Cover Pages
Cover Page of Prospectus

3. Summary Information and Risk Prospectus Summary; Risk Factors
Factors

4. Use of Proceeds Use of Proceeds

5. Determination of Offering Price Cover Page; Risk Factors

6. Dilution Not Applicable

7. Selling Security Holders Selling Stockholders

8. Plan of Distribution Selling Stockholders

9. Legal Proceedings Not Applicable

10. Directors, Executive Officers, Management; Principal Stockholders
Promoters and Control Persons

11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management

12. Description of Securities Description of Securities

13. Interest of Named Experts and Not Applicable
Counsel

14. Disclosure of Commission Position Item 25 -- Undertakings
on Indemnification for Securities

15. Organization Within Last Five Prospectus Summary; Certain Transactions
Years

16. Description of Business Risk Factors; Business

17. Management's Discussion and Management's Discussion and Analysis of
Analysis or Plan of Operations Financial Condition and Results of
Operations

(ii)

<PAGE>

18. Description of Property Business--Properties

19. Certain Relationships and Related Certain Transactions
Transactions

20. Market for Common Equity and Price Range of Common Stock;
Related Stockholder Matters Description of Securities

21. Executive Compensation Management--Executive Compensation

22. Financial Statements Financial Statements

23. Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure

</TABLE>

(iii)

<PAGE>

Subject to Completion Dated October 23, 1996

GUM TECH INTERNATIONAL, INC.
2,874,715 Shares of Common Stock

Gum Tech International, Inc. (the "Company") is registering hereby an
aggregate of 2,874,715 shares of its no par value Common Stock ("Common Stock")
on behalf of certain stockholders of the Company (the "Selling Stockholders").
The Common Stock will be sold (the "Offering") by the Selling Stockholders in
open market transactions at prevailing market prices less customary selling
commissions. The Selling Stockholders may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "1933 Act"). See "Selling
Stockholders." None of the proceeds from the sale of the Common Stock will be
received by the Company. The Company will bear the expenses of the Offering,
expected not to exceed $50,000.

The Company's Common Stock trades on the National Market of NASDAQ under
the symbol "GUMM." On October 21, 1996, the closing price of the Common Stock
was $6.00 per share. See "Price Range of Common Stock."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION")
NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
AND SHOULD BE CONSIDERED ONLY BY PERSONS ABLE TO SUSTAIN
A TOTAL LOSS OF THEIR INVESTMENT. SEE "RISK FACTORS."

The date of this Prospectus is __________, 1996.

<PAGE>

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form SB-2 (the
"Registration Statement") under the 1933 Act with respect to the securities
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain items of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered by this Prospectus, reference
is made to such Registration Statement and the exhibits thereto. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof; each such
statement contained herein is qualified in its entirety by such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and, in accordance therewith,
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
public reference facilities of the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; 7 World Trade Center, New York, New York 10048; and 5757 Wilshire
Boulevard, Los Angeles, California 90036. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth Street
N.W., Washington, D.C. 20549 at prescribed rates.

The Company furnishes annual reports which include audited financial
statements to its stockholders. The Company may also furnish quarterly financial
statements to its stockholders and such other reports as may be authorized by
its Board of Directors.

<PAGE>

PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the detailed information and
financial statements that appear elsewhere herein.

The Company

The Company was organized in 1991 to develop, market and distribute
specialty chewing gum products under its own brand names and on a private label
basis for other chewing gum marketers. The Company's current chewing gum
products contain ingredients which it claims (i) promote weight loss (under the
"ChromaTrim" and "CitrusSlim" brand names), (ii) contribute to energy and
endurance (under the "Buzz Gum", "Power Gum" and "Love Gum" brand names), (iii)
alleviate certain premenstrual symptoms (under the "Repose" brand name) and (iv)
promote oral hygiene and breath freshness (under the "DentaHealth" brand name).
The Company also markets a chewing gum product which includes antioxidant
vitamins (under the "Vita A-C-E" brand name). Sales of Power Gum and Love Gum
commenced in 1994 while sales of Buzz Gum, ChromaTrim and CitrusSlim commenced
in 1991, 1993 and 1995, respectively. The Company began distribution of Repose,
DentaHealth and Vita A-C-E in April 1996.

The Company contracted with others for the manufacture of all its chewing
gum products until February 1996 when it completed leasehold improvements and
began initial manufacture of chewing gum products in its 28,000 square foot
facility in Phoenix, Arizona. The facility employs 28 workers and produces all
of the Company's chewing gum products. See "Business - Manufacturing and
Packaging."

The Company's business strategy is to (i) manufacture its own chewing gum
products and the private label chewing gum products of other chewing gum
marketers in greater quantities and at lower costs, (ii) increase revenues by
(a) expanding its marketing efforts for existing chewing gum products, (b)
developing new chewing gum products through its own research and development
facilities and (c) further developing its private label business, and (iii)
expand its distribution and customer base by adding over-the-counter ("OTC")
non-prescription medications (such as antacids, cough suppressants, pain
relievers and the like) to its chewing gum products. The Company has not yet
commenced the distribution or marketing of any OTC chewing gum products but
expects (but cannot assure) that it will do so by November, 1996. See "Business
- - Strategy."

The Company markets its chewing gum products through wholesale distributors
who distribute primarily to natural food stores and through other brokers,
marketers and distributors to convenience stores and independent grocery and
drug stores. The Company also markets to chain grocery, drug and club stores and
to larger private label customers who market under their own brand names.

<PAGE>

Some of the Company's specialty chewing gum products are subject to
regulation by the United States Food and Drug Administration ("FDA"). If the FDA
concludes that certain chewing gum products are "drugs" under applicable FDA
regulations or if the Company commences marketing of OTC chewing gum products,
the FDA may restrict or remove any or all of the Company's chewing gum products
from the market if such products violate FDA rules or regulations. On April 1,
1994 the Company received a Warning Letter from the FDA indicating that the
Company's Buzz Gum chewing gum products were mislabeled. In June 1994 the
Company revised its labeling and so notified the FDA. No further action was
taken by the FDA. See "Risk Factors - Government Regulation" and "Business -
Government Regulation."

History

The Company was incorporated in Utah in February 1991 as a specialty
chewing gum products marketer under the name Nekros International Marketing,
Inc. with office and warehouse facilities initially located in Ogden, Utah. In
November 1994, control of the Company changed and between May 1995 and November
1995, the Company raised an aggregate of $1,006,000 of equity capital and
$2,400,000 of debt capital. (For a detailed description of the Company's
corporate history including its change of control, see "Business - History and
Introduction.") The funds raised in 1995 were used to establish a new management
team, develop additional chewing gum products, build inventories and purchase
chewing gum manufacturing equipment for its 28,000 square foot leased
manufacturing facility in Phoenix, Arizona. In January 1996, the Company raised
$3,095,875 through a private equity placement to repurchase and retire 619,175
shares of the Company's Common Stock held by a former principal stockholder. In
April 1996, the Company sold to the public 460,000 Units of its securities at
$18.00 per Unit, each Unit consisting of three shares of Common Stock and one
Common Stock Purchase Warrant (the "Public Warrant") to purchase an additional
share of Common Stock at any time until April 24, 2001 at $7.50 per share (the
"Prior Offering"). At the same time, the Company registered 619,175 shares which
were sold in the aforementioned private placement. The Prior Offering was
underwritten by Kensington Securities, Inc. (the "Prior Representative"). See
"Certain Transactions."

The Company's executive offices are located at 4205 North 7th Avenue,
Phoenix, Arizona 85013, telephone (602) 277-0606, and its warehouse and
manufacturing facility is located at 246 East Watkins, Phoenix, Arizona 85004.

The Offering

Securities offered.............. 2,874,715 shares of Common Stock held by
the Selling Stockholders

Offering price.................. Market price of the Common Stock on the
National Market

<PAGE>

Securities outstanding(1)........ 4,896,740 shares and 460,000 Public
Warrants

Use of Proceeds.................. None of the proceeds will be received by
the Company. See "Use of Proceeds."

National Market and NASDAQ
SmallCap symbols................. GUMM - Common Stock (National Market)
GUMMW - Public Warrants (NASDAQ SmallCap)

Transfer Agent................... Corporate Stock Transfer, Inc.

- ----------
(1) Excludes exercise of (i) the Public Warrants, (ii) the Prior
Representative's Warrants to purchase up to 40,000 Units (each Unit
consisting of one share of Common Stock and one Public Warrant) at $24.75
per Unit at any time from April 24, 1997 until April 24, 2001 (the "Prior
Representative's Unit Warrants") and (iii) outstanding stock options and
common stock purchase warrants to purchase up to 1,585,000 shares of Common
Stock including 760,000 shares issuable under the Company's 1995 Stock
Option Plan (the "1995 Plan"). See "Dilution", "Capitalization",
"Management - 1995 Stock Option Plan", "Certain Transactions", "Description
of Securities" and "Underwriting."

<PAGE>

Summary Financial Information

The following financial information has been derived from the financial
statements of the Company appearing elsewhere in this Prospectus and should be
read in conjunction with such financial statements.

Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 2,044,531 $1,732,825 $4,343,590 $1,941,562
Pretax income (loss) (792,367) 401,519 768,321 231,589
Net income (loss) (579,024) 258,513 497,471 231,589
Pro forma net income
(loss) per share (1) (.15) .06 .11 .03
Pro forma net income
(loss) (579,024) 258,513 497,471 150,589
Weighted average shares
outstanding (1) 3,974,103 4,392,658 4,392,658 4,392,658

June 30,
1996
-----------
Balance Sheet Data:
Working capital $ 5,600,243
Total assets 10,329,054
Long-term debt 1,594,160
Total liabilities 2,350,945
Stockholders' equity 7,978,109
</TABLE>

- ----------
(1) For a description of net income per share and the number of shares used in
computing per share amounts, see Note 1 of Notes to Financial Statements.

<PAGE>
RISK FACTORS

In evaluating the Company's business, prospective investors should consider
carefully the following factors in addition to the other information presented
in this Prospectus.

Limited Operating History; Recent Losses. The Company began operations in
February 1991, and has a limited operating history upon which potential
investors may evaluate its performance. Although the Company reported net income
for the years ended December 31, 1994 and 1995, it reported losses for the six
months ended June 30, 1996 of $579,024, expects a loss for the three months
ended September 30, 1996 and can give no assurance that future operations will
be profitable. The likelihood of the Company's success must be considered
relative to the problems, difficulties, complications and delays frequently
encountered in connection with the development and operation of a new business
and the competitive environment in which the Company intends to operate. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and "Financial Statements."

Unproven Markets for Certain of the Company's New Products; No Assurance of
Consumer Acceptance. The Company recently introduced three new chewing gum
products (Repose, DentaHealth and Vita A-C-E), which the Company claims
alleviate certain premenstrual symptoms, promote oral hygiene and provide
antioxidant vitamins, respectively. There can be no assurance that a market
exists for any of these chewing gum products, or that consumers will purchase
these or any other new product offerings of the Company in sufficient amounts to
justify continued production.

Significant Fixed Costs for and Underutilization of Manufacturing
Facility. The Company estimates that the fixed costs associated with its
Phoenix, Arizona manufacturing facility approximate $160,000 per month and that
only 10% of the facility's total capacity is currently being utilized. These
fixed costs have contributed to significant losses reported by the Company for
the six months ended June 30, 1996 and will continue to significantly contribute
to losses until the Company increases utilization of the facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Competition. The distribution and sale of chewing gum products are highly
competitive and consists primarily of three multi-billion dollar United
States-based multinational companies (Wm. Wrigley Jr. Company, Warner Lambert
Company and Nabisco Food Group, Inc.) which own most of the chewing gum brands,
large specialty chewing gum manufacturers, such as The Topps Company ("Bazooka"
brand chewing gum) and Marvel Holdings, Inc. ("Double Bubble" brand chewing
gum), and small specialty chewing gum marketers, such as the Company. The
Company does not have the capital resources, marketing and distribution
networks, manufacturing facilities, personnel, product name recognition or
advertising budget to introduce chewing gum brands intended to compete with the
multinational chewing gum manufacturers or the large specialty chewing gum
marketers. See "Business - Competition."

<PAGE>

FDA and Other Government Regulation. The Company's chewing gum products
manufactured by it or by others for it are subject to regulation by the FDA
including regulations with respect to labeling of products, approval of
ingredients in products, claims made regarding products and disclosure of
product ingredients. In addition, the Federal Trade Commission ("FTC") has
jurisdiction over advertising of the Company's products. Moreover, if the FDA
concludes that any of the Company's chewing gum products are "drugs" under
applicable FDA regulations or otherwise violate FDA rules or regulations, the
FDA may (i) require that manufacture of such products be in accordance with FDA
"good manufacturing practices" (which prescribe specific requirements and
procedures for the manufacture of FDA regulated products), or (ii) restrict or
remove such products from the market. Such action may be taken against the
Company and any entity which manufactures products for the Company. Any OTC
chewing gum products offered by the Company will be subject to marketing
permission and ongoing intensive regulation by the FDA.

On April 1, 1994 the Company received a Warning Letter from the FDA
indicating that the Company's Buzz Gum chewing gum products were mislabeled. In
June 1994 the Company revised its labeling and so notified the FDA. No further
action was taken by the FDA.

The Company's chewing gum manufacturing facilities are subject to
regulation by various governmental agencies, including state and local
licensing, zoning, land use, construction and environmental regulations and
various health, sanitation, safety and fire codes and standards. Suspension of
certain licenses or approvals, due to failure to comply with applicable
regulations or otherwise, could interrupt the Company's manufacturing
operations. Should the Company elect to manufacture OTC chewing gum products,
its manufacturing facilities will also be subject to inspection and regulation
by the FDA. See "Business - FDA and Other Government Regulation."

Dependence on Significant Distributors. Two affiliated distributors
accounted for 42.8% and 26.7% of the Company's revenues for the year ended
December 31, 1995, and 18.7% and 5.2% of the Company's revenues for the six
months ended June 30, 1996. A loss of either of these distributors would have a
material adverse effect on the Company's operations. See "Business - Marketing"
and "Certain Transactions."

No Assurance of Scientific Proof. Under FDA and FTC rules, the Company is
required to obtain scientific data to support any health claims it makes
concerning its products, although no preclearance or filing is required to
market the products. The Company has obtained such scientific data for all its
products and employs two individuals to gather and organize the scientific data
when required. The Company has not provided nor been requested to provide any
scientific data to the FDA. The marketing of certain of the Company's chewing
gum products involves claims that such products assist in weight loss, alleviate
certain premenstrual symptoms, promote dental hygiene and the like. There can be
no assurance that the scientific data obtained by the Company in support of such
claims will be deemed acceptable by the FDA or FTC, should either agency request
any such data in the future.

<PAGE>

No Assurance of Proprietary Protection. The Company considers some of its
chewing gum formulations and processes to be proprietary in nature and relies
upon a combination of non-disclosure agreements, other contractual restrictions
and trade secrecy laws to protect such proprietary information. There can be no
assurance that these steps will be adequate to prevent misappropriation of the
Company's proprietary information or that the Company's competitors will not
independently develop chewing gum formulations and processes that are
substantially equivalent or superior to the Company's. The Company holds certain
trademark and trade name protection for some of its chewing gum products and has
applied for trademark and trade name protection on other products. There can be
no assurance that the Company will be able to successfully defend its trademarks
or trade names against claims from or use by competitors or obtain trademark or
trade name protection for new products. See "Business - Trademarks, Trade Names
and Proprietary Rights."

Risks of New Product Development. The Company may experience difficulties
that could delay or prevent the introduction of new chewing gum products. The
Company may be dependent in the near future upon chewing gum products that are
currently being developed by it. If the Company is unable to develop new chewing
gum products on a timely basis, the Company's business, operating results and
financial condition could be materially adversely affected. See "Business -
Strategy."

Risks Associated with Expansion. The Company intends to continue to expand
its manufacturing and marketing operations. Expansion will place substantial
strains on the Company's newly retained management and its operational,
accounting and information systems. Successful management of growth will require
the Company to improve its financial controls, operating procedures and
management information systems, and to train, motivate and manage its employees.
The Company's failure to manage growth effectively would have a material adverse
effect on its results of operations and its ability to execute its business
strategy. See "Business - Strategy."

Dependence Upon Management Personnel and Executive Officers; Management
Changes. The Company's operations are dependent upon its ability to hire and
retain qualified management personnel and upon the continued services of its
executive officers. The loss of services of any of the Company's executive
officers, whether as a result of death, disability or otherwise, would have a
material adverse effect upon the business of the Company. The Company has
experienced significant management changes in 1995 and 1996 including the
appointment of a new Chief Executive Officer and President in August 1996. The
Company has entered into employment agreements with its current executive
officers but does not have key man life insurance upon their lives. See
"Management."

Possible Fluctuations in Operating Results. The Company's operating results
have varied and will continue to vary from period to period as a result of the
amount its manufacturing facilities are utilized, the purchasing patterns of
consumers, the timing of new product introductions by the Company and its
competitors and variations in sales and competitive pricing. Unanticipated
events, including delays in developing, manufacturing or marketing new chewing

<PAGE>

gum products, could have an adverse effect on the Company's operating results
and could also result in significant fluctuations in operating results in future
periods.

Possible Need for Additional Financing. In the event that the proceeds of
the Prior Offering or cash flow from operations prove to be insufficient to
cover the Company's cash requirements (due to unanticipated expenses,
difficulties, problems or otherwise), the Company may be required to seek
additional debt or equity financing or curtail its expansion activities. There
can be no assurance that additional financing will be available to the Company
on acceptable terms, or at all. Any future equity financing may involve
substantial dilution to the interests of the Company's stockholders.

Product Liability. The Company is subject to significant liability should
use or consumption of its products cause injury, illness or death. Although the
Company carries product liability insurance, there can be no assurance that its
insurance will be adequate to protect the Company against product liability
claims or that insurance coverage will continue to be available to the Company
on reasonable terms.

No Dividends. In the past, the Company has paid only limited cash dividends
on its Common Stock and does not intend to pay any cash dividends on its Common
Stock in the foreseeable future. Earnings, if any, will be used to finance
growth. The Company has no financing or other agreements which prohibit payment
of dividends. See "Description of Securities - Dividends."

Possible Volatility of Securities Prices. The market price of the Common
Stock may be highly volatile, as has been the case with the securities of other
recently formed companies. Factors such as the Company's operating results or
public announcements by the Company or its competitors may have a significant
effect on the market price of the Company's securities. In addition, market
prices for securities of many small capitalization companies have experienced
wide fluctuations in response to variations in quarterly operating results,
general economic indicators and other factors beyond the control of the Company.
The registration of the Common Stock offered hereby coupled with exercise of the
Public Warrants could increase the volatility of the Common Stock by increasing
the number of shares of publicly traded Common Stock outstanding.

Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the open market or the availability of such shares for sale could
adversely affect the market price for the Common Stock. As of the date hereof,
all 4,896,740 shares of the Company's Common Stock have been registered for
public sale and may be immediately sold by the holders, subject only to an April
24, 1996 agreement between the holders of 2,874,715 shares (all of which are
being registered hereby) and the Prior Representative in which they agreed not
to sell or otherwise dispose of their shares of Common Stock until April 24,
1998 without the prior written consent of the Prior Representative. See
"Description of Securities - Common Stock Eligible for Future Sale" and
"Underwriting."

<PAGE>

Control by Management; Authorization and issuance of Preferred Stock;
Prevention of Changes in Control. The Company's officers and directors own
approximately 23.2% of the issued and outstanding shares of Common Stock
(assuming exercise by them of outstanding stock options and common stock
purchase warrants), and can as a practical matter continue to elect all of the
Company's directors and control the affairs of the Company. The Company's
Certificate of Incorporation authorizes the issuance of up to 1,000,000 shares
of Preferred Stock with such rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, under the Certificate of
Incorporation, the Board of Directors may, without shareholder approval, issue
Preferred Stock with dividend, liquidation, conversion, voting, redemption or
other rights which could adversely affect the voting power or other rights of
the holders of the Common Stock. The issuance of any shares of Preferred Stock
having rights superior to those of the Common Stock may result in a decrease in
the value or market price of the Common Stock and could be used by the Board of
Directors as a device to prevent a change in control of the Company. The Company
has no other anti-takeover provisions in its Certificate of Incorporation or
Bylaws. Holders of the Preferred Stock may have the right to receive dividends,
certain preferences in liquidation, and conversion rights. See "Description of
Securities - Use of Preferred Stock As Anti-Takeover Device" and "Principal
Stockholders."

Elimination of Director Liability. The Company's Certificate of
Incorporation contains a provision eliminating a director's liability to the
Company or its stockholders for monetary damages for a breach of fiduciary duty,
except in circumstances involving a financial benefit to a director, the
intentional infliction of harm of the Company or certain wrongful acts, such as
the breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of criminal law. The Company's
Bylaws contain provisions obligating the Company to indemnify its directors and
officers to the fullest extent permitted under Utah law. These provisions could
serve to insulate officers and directors of the Company against liability for
actions which damage the Company or its stockholders. See "Description of
Securities - Limitation on Liability."

Maintenance Criteria for NASDAQ Securities. The National Association of
Securities Dealers, Inc. ("the NASD"), which administers NASDAQ, recently made
changes in the criteria for continued NASDAQ eligibility. In order to continue
to be included in NASDAQ, a company must maintain $2 million in total assets, a
$200,000 market value of its public float and $1 million in total capital and
surplus. In addition, continued inclusion requires two market-makers, at least
300 holders of the Common Stock and a minimum bid price of $1 per share;
provided, however, that if a company falls below such minimum bid price, it will
remain eligible for continued inclusion in NASDAQ if the market value of the
public float is at least $1 million and the Company has $2 million in capital
and surplus. The Company's failure to meet these maintenance criteria in the
future may result in the discontinuance of the inclusion of its securities in
NASDAQ. In such event, trading, if any, in the securities may then continue to
be conducted in the non-NASDAQ over-the-counter market in what are commonly
referred to as the electronic bulletin board and the "pink sheets." As a result,
an investor may find it more difficult to dispose of or to obtain accurate
quotations as to the market value of the securities. In addition, the Company
would be subject to a rule promulgated by the Commission that, if the

<PAGE>

Company fails to meet criteria set forth in such rule, imposes various sales
practice requirements on broker-dealers who sell securities governed by the rule
to persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transactions prior to sale. Consequently, the rule may have an
adverse effect on the ability of broker-dealers to sell the securities, which
may affect the ability of purchasers in the Offering to sell the securities in
the secondary market.

Disclosure Related to Penny Stocks. The Commission has recently adopted
rules that define "penny stock." In the event that any of the Company's
securities are characterized in the future as penny stock, broker-dealers
dealing in the securities will be subject to the disclosure rules for
transactions involving penny stocks which require the broker-dealer among other
things to (i) determine the suitability of purchasers of the securities and
obtain the written consent of purchasers to purchase such securities and (ii)
disclose the best (inside) bid and offer prices for such securities and the
price at which the broker-dealer last purchased or sold the securities. The
additional burdens imposed upon broker-dealers may discourage them from
effecting transactions in penny stocks, which could reduce the liquidity of the
securities offered hereby.

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at June
30, 1996, without giving effect to the exercise of (i) the Public Warrants, (ii)
the Prior Representative's Unit Warrants or (iii) outstanding stock options or
common stock purchase warrants to purchase up to 1,585,000 shares of Common
Stock including 760,000 shares issuable under the Company's 1995 Plan.

June 30, 1996
-------------
Long-term debt:
Notes payable $1,815,909
----------
Stockholders' equity:
Preferred Stock, 1,000,000 no par value
shares authorized, none issued --
Common Stock, 10,000,000 no par value
shares authorized, 4,876,740 shares
issued and outstanding 7,851,060
Retained earnings 127,049
----------
Total stockholders' equity 7,978,109
----------
Total capitalization $9,794,018
==========

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has traded on the National Market under the
symbol "GUMM" since April 24, 1996.

The following table sets forth for the quarters indicated the range of high
and low closing prices of the Company's Common Stock as reported by the National
Market but does not include retail markup, markdown or commissions.

Price
-------------
By Quarter Ended: High Low
- ----------------- ---- ---

December 31, 1996 (through October 21, 1996)............ $7.75 $5.75
September 30, 1996...................................... 6.125 6.00
June 30, 1996........................................... 6.875 6.375

As of October 21, 1996, the Company had approximately 350 record and
beneficial stockholders.

USE OF PROCEEDS

None of the proceeds of the Offering will be received by the Company. See
"Selling Stockholders."

<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below for the years ended December
31, 1995 and 1994 has been derived from the Company's financial statements which
have been audited by Angell & Deering. The selected financial data is qualified
by, and should be read in conjunction with, the financial statements and the
notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- -----------------------
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 2,044,531 $1,732,825 $4,343,590 $1,941,562
Pretax income (loss) (792,367) 401,519 768,321 231,589
Net income (loss) (579,024) 258,513 497,471 231,589
Pro forma net income
(loss) per share (1) (.15) .06 .11 .03
Pro forma net income
(loss) (579,024) 258,513 497,471 150,589
Weighted average shares
outstanding (1) 3,974,103 4,392,658 4,392,658 4,392,658

June 30,
1996
-----------
Balance Sheet Data:
Working capital $ 5,600,243
Total assets 10,329,054
Long-term debt 1,594,160
Total liabilities 2,350,945
Stockholders' equity 7,978,109
</TABLE>

- ----------
(1) For a description of net income per share and the number of shares used in
computing per share amounts, see Note 1 of Notes to Financial Statements.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company was organized in 1991 to develop, market and distribute
specialty chewing gum products. The Company's first chewing gum product included
a natural caffeine substance marketed to runners and other exercise enthusiasts
as a source of energy and carbohydrates. In 1994 and 1995, the Company raised
funds through debt and equity financings which were used to establish a new
management team, develop additional chewing gum products, build inventories and
purchase chewing gum manufacturing equipment for the Company's 28,000 square
foot manufacturing facility which commenced operations in February 1996. The
facility employs 28 workers and produces all of the Company's chewing gum
products.

Results of Operations

The following table sets forth certain statement of operations information
expressed both in dollars and as a percentage of net sales for the periods
indicated:

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
<S> <C> <C> <C> <C>
Net sales $4,343,590 100.0% $1,941,562 100.0%
Cost of sales 2,310,643 53.2 1,011,956 52.1
Gross profit 2,032,947 46.8 929,606 47.9
Operating expenses 1,118,510 25.7 694,555 35.8
Research and development 90,348 2.1 - -
Income from operations 824,089 19.0 235,051 12.1
Interest and other income 53,212 1.2 940 .1
Interest expense 108,980 2.5 4,402 .2
Pro forma provision
for income taxes 270,850 6.2 81,000 4.2
Pro forma net income 497,471 11.5 150,589 7.8
</TABLE>

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net Sales. Net sales increased by $2.4 million, or 124%, to $4.3 million
for the year ended December 31, 1995 ("1995") compared to $1.9 million for the
year ended December 31, 1994 ("1994"). This increase was primarily the result of
the introduction of "CitrusSlim" which accounted for $340,000 of such sales
increase and the expansion of the Company's distribution channels to include
infomercial television broadcasts which the Company believes were also
responsible for a large part of the additional sales. Product pricing was not
changed in 1995.

Cost of Sales. Cost of sales increased 1% to 53% in 1995 compared to 52% in
1994 primarily as a result of new package designs, increased production costs
and the purchase of higher priced gum from a foreign supplier to be used in a

<PAGE>

chewing gum product sold internationally. The majority of the Company's costs of
sales resulted from purchases of gum products from third party manufacturers.
Costs of sales are expected to be reduced when the Company's manufacturing
facility is completed.

Gross Profit. Gross profit decreased 1% to 47% in 1995 compared to 48% in
1994 as a result of the increased costs discussed above and certain price
discounts given by the Company to volume distributors. During 1995, the Company
pursued relationships with distributors that specialized in selling to mass
merchandisers, drug and convenience stores and national broadcasters of
infomercials. While these distributors were offered volume price discounts, the
arrangement increased sales revenue, decreased monthly sales fluctuations and
allowed for more orderly production planning

Operating Expenses. Operating expenses increased $423,955 in 1995 compared
to 1994 but decreased as a percentage of net sales from 36% in 1994 to 26% in
1995. The increase in expenditures was primarily due to the hiring of new
management personnel ($152,508) together with increases in trade show expenses
($48,939), legal fees ($80,317) and travel expenses ($60,634). The reduction of
operating expenses as a percentage of net sales was the result of increased
sales. Operating expenses will increase as the Company expands its manufacturing
operations.

Research and Development. Research and development expenditures were
$90,348 in 1995 compared to $0 in 1994 and resulted from expenses associated
with development of new products. Prior to June 1995, development activities
were conducted by outside consultants. The Company developed three additional
products which it intended to introduce in 1995. However, the Company was unable
to obtain assurances that its existing manufacturer would be able to supply
adequate quantities of the product. Consequently, management decided that the
new products will be introduced in 1996 when the Company's manufacturing
facility is completed.

Interest and Other Income and Interest Expense. Interest expense increased
$108,980 in 1995 (from $4,402 in 1994) as a result of the Company issuing $2.4
million of debt securities, which will be retired using proceeds of the
Offering. Proceeds from the loans were used to pay deposits on chewing gum
manufacturing equipment, to build inventories of new products, for marketing
expenses and working capital. Interest and other income increased $52,272
primarily as a result of an increase in working capital from equity financings
that was invested in short-term investments.

Pro Forma Provisions for Income Taxes. Beginning January 1, 1993, the
Company was an S Corporation under the provisions of the Internal Revenue Code
through November 18, 1994. As such, the Company was not subject to federal and
state income taxes and, accordingly, no provision was made for income taxes for
1993 and 1994, and the Company's stockholders were required to report the
Company's taxable income on their tax returns. The statements of operations
include a pro forma income tax adjustment that represent the federal and state

<PAGE>

provision for income taxes as if the Company had been a taxable entity paying
federal and state income taxes for all periods presented at the rates applicable
in each period. Effective November 18, 1994, the Company revoked its S
Corporation election and all income subsequent to that date will be subject to
federal and state income taxes.

Pro forma Net Income. Net income after pro forma income taxes increased
from $150,589 in 1994 to $497,471 in 1995 primarily as a result of increased net
sales and the resulting economies of scale applicable to the Company's fixed and
variable expenses.

The following table sets forth certain information expressed both in
dollars and as a percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---- ----

<S> <C> <C> <C> <C>
Net sales $2,044,531 100.0% $1,732,825 100.0%
Cost of sales 1,069,832 52.3 967,760 55.8
Gross profit 974,699 47.7 765,065 44.2
Operating expenses 1,624,415 79.5 352,198 20.4
Research and development 50,773 2.5 12,392 0.7
Income (loss) from operations (700,489) (34.3) 400,475 23.1
Interest and other income 45,733 2.2 26,460 1.5
Interest expense 137,611 6.7 25,416 1.5
Pro forma provision (benefit)
for income taxes (213,343) (10.5) 143,006 8.2
Pro forma net income (loss) (579,024) (28.3) 258,513 14.9
</TABLE>

Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995

Net Sales. Net sales increased by $311,706, or 18%, to $2,044,531 for the
six months ended June 30, 1996 compared to $1,732,825 for the six months ended
June 30, 1996. The increase in sales was a result of an expanded distribution
network, the introduction of several new products and increased shipments of
existing products to the Company's primary distributor.

Cost of Sales. Cost of sales decreased 4% to $1,069,832 or 52% of net sales
for the six months ended June 30, 1996, compared to $967,760 or 56% of net sales
for the same period in 1995. This decrease was primarily due to the Company
selling directly to mass market, drug, food and export customers at higher gross
margins. Cost of sales are expected to continue to decline as the manufacturing
facility becomes more efficient.

Gross Profit. Gross profit increased by 4% to $974,699 or 48% of net sales
for the six months ended June 30, 1996, compared to $765,065 or 44% of net sales
for the same period in 1995.

<PAGE>

Operating Expenses. Operating expenses were $1,624,415, an increase of
$1,272,217 for the six months ended June 30, 1996, compared to the same period
in 1995. Approximately $721,000 of these operating expenses were directly
attributable to the operations of the manufacturing facility. No manufacturing
expenses were incurred for the six months ended June 30, 1995 as the Company had
not yet commenced manufacturing operations. Moreover, because the manufacturing
facility continues to operate at only a small percentage of its capacity,
revenues were not sufficient to offset the manufacturing operating expenses.
Factors contributing to an increase in non-manufacturing operating expenses were
related to advertising ($319,925), labor ($300,866), professional fees for
legal, accounting, art/production, and general consulting ($167,724), insurance
($86,488), and trade shows ($51,766).

Research and Development. Research and development expenditures were
$50,773 for the six months ended June 30, 1996, compared to $12,392 for the same
period in 1995. The majority of these costs were related to the development and
production scale-up of the Jack Lalanne product line, DentaHealth, Vita A-C-E
and Repose and the research and development of OTC gum products and private
label products.

Interest and Other Income and Interest Expense. Interest and other income
was $45,733, an increase of $19,273 and was primarily the result of an increase
in working capital from equity financings that were invested in short-term
investments. Interest expense was $137,611, an increase of $112,195 for the six
months ended June 30, 1996 compared to the same period in 1995. This increase
was a result of the Company issuing $2.4 million of debt securities and
equipment financing for the manufacturing facility. Proceeds from the loans were
used to pay deposits on chewing gum manufacturing equipment, to build
inventories of new products, for marketing expenses and working capital.
Proceeds from the Prior Offering were used to retire the debt in early May 1996.
In addition, the Company entered into a $1.85 million equipment financing
agreement with Textron Financial Corporation for the Company's gum manufacturing
equipment.

Net Income. The Company incurred a loss of $579,024 for the six months
ended June 30, 1996 compared to a profit of $258,513 for the same period in
1995. The loss incurred in this period was primarily due to an increase in
operating expenses as described above.

Liquidity and Capital Resources

As of June 30, 1996, the Company's working capital was $5.6 million
compared to $1.74 million at June 30, 1995. For the six months ended June 30,
1996, the Company experienced a decrease in cash provided by operating
activities of $1,765,090 primarily as a result of an increase in accounts
receivable and inventories. The increase in inventory was directly related to
the build-up of new product finished goods and raw materials for the
manufacturing facility.

<PAGE>

Investing activities consumed $764,056 in cash for the six months ended
June 30, 1996 compared to $808,637 of cash for the same period of 1995. Use of
cash primarily resulted from equipment purchased to start up the manufacturing
facility in Phoenix, Arizona.

Financing activities provided $5,343,548 in cash for the six months ended
June 30, 1996 compared to $1,892,498 in cash for the same period in 1995. This
increase in cash was primarily a result of the Prior Offering of 400,000 units
(each unit consisted of three shares of no par value common stock and one
redeemable common stock purchase warrant) for gross proceeds of $7.2 million on
April 24, 1996. In addition, the Prior Underwriter exercised its Overallotment
Option of 60,000 units and the Company received gross proceeds of $1.08 million
on May 24, 1996. The Company paid $1.45 million in commissions, underwriter's
expenses and other costs related to the Prior Offering. The Company used $2.57
million from the Prior Offering to repay its debt securities provided by
stockholders in 1995.

Textron Financial Corporation ("Textron") provided financing for the
Company's gum manufacturing equipment. The Company entered into a six-year
equipment lease agreement with Textron in December 1995 pursuant to which
Textron funded approximately $1.85 million of gum manufacturing equipment.
Monthly lease payments commenced in January 1996.

Management believes that the proceeds of the Prior Offering will be
sufficient to meet the Company's working capital requirements during 1996.

The Company's future results of operations and any forward looking
statements contained in this Prospectus, in particular the statement(s)
concerning manufacturing facility's efficiencies and capacities, capital
spending, research and development and other expenses involve a number of risks
and uncertainties. In addition to the factors discussed above, among the other
factors that could cause actual results to differ materially are the following:
business conditions and the general economy; competitive factors, such as rival
gum manufacturers' pricing and marketing efforts; availability of third-party
material products at reasonable prices; risk of nonpayment of accounts
receivable; risks of inventory obsolescence due to shifts in market demand;
timing of product introductions; and litigation involving product liabilities
and consumer issues.

<PAGE>

BUSINESS

History and Introduction

The Company was organized as a Utah corporation in February 1991 under the
name Nekros International Marketing, Inc. to develop, market and distribute
specialty chewing gum products under its own brand names and on a private label
basis for other chewing gum marketers. In January 1993 the Company changed its
name to Gum Tech International, Inc. Between May 1, 1994 and November 15, 1994
the Company was involuntarily dissolved (and then reinstated) for failure to
timely file its corporate annual report in Utah. Between February 1991 and
November 1994, the Company developed and marketed a number of specialty chewing
gum products under its own brand names and on a private label basis. During that
time, Richard Bernstein, who is now an officer and director of the Company,
acted as an independent marketer of certain of the Company's brand name chewing
gum products through Bernstein Bros. Marketing Corporation and Universal
Merchants, Inc. In November 1994, Gregory Gossett, then the Company's President
and majority stockholder, sold a controlling interest in the Company to Dale
Holdings, LDC ("Dale"). See "Certain Transactions." In April 1995, Dale changed
the Company's management by requesting the resignation of two of the Company's
directors (Jonathan Harrison and Kirk Gossett) and by adding Messrs. Epert,
Ratcliff, Kehoe, Bernstein, Bouchy, Manhold, Monte and Wood as officers and
directors. In August 1996 and May 1996, respectively, Messrs. Manhold and Wood
resigned as directors and in June 1996 William G. Meris was elected a director.
In August 1996, (i) Mr. Ratcliff resigned as Chief Executive Officer of the
Company and was appointed its Chairman and Senior Vice President, (ii) Mr. Epert
resigned as President of the Company and was appointed its Vice Chairman and
Executive Vice President, and (iii) Gerald N. Kern was appointed Chief Executive
Officer and President. See "Management."

In October 1995, the Company borrowed $1,550,000 from a group of four
lenders (the "1995 Bridge Loan"). As additional compensation for the 1995 Bridge
Loan, the Company issued an aggregate of 465,000 common stock purchase warrants
to the lenders, each such warrant exercisable to purchase one share of the
Company's Common Stock at $2.00 per share exercisable in perpetuity. The Bridge
Loan bore interest at 8% per annum and was repaid in April 1996 using proceeds
from the Prior Offering. The Bridge Loan lenders included Brett Bouchy, a former
principal stockholder of the Company (who received 165,000 warrants), and Robert
H. Wood, a former director of the Company (who received 75,000 warrants). In
March 1996, Brett Bouchy sold 100,000 warrants to Gary S. Kehoe and 65,000
warrants to Robert H. Wood, both officers and directors of the Company, for
$5.00 per warrant. The purchase price was paid by the issuance of promissory
notes by Messrs. Kehoe and Wood to Mr. Bouchy bearing interest at 9% per annum.
The warrants are not collateral for the promissory notes. The promissory notes
are due the earlier of (i) six months after the warrants are exercised or (ii)
if during the period from April 24, 1997 until April 24, 2000 the closing price
of the Company's Common Stock on NASDAQ is $10.00 or more per share for five
consecutive trading days then the promissory notes are due six months from the
last such trading day. If neither event occurs, the promissory notes become void
and of no value on April 24, 1999 and the warrants remain the property of

<PAGE>

Messrs. Kehoe and Wood. Under no circumstances will the warrants become
returnable to Mr. Bouchy. Mr. Bouchy sold the warrants at the request of the
National Market who had advised the Company that neither NASDAQ nor the National
Market would list the Company's securities so long as Mr. Bouchy was an equity
holder in the Company. The National Market's objection to allowing Mr. Bouchy to
remain an equity holder in the Company resulted from fines and censures imposed
upon Mr. Bouchy by the NASD and the Securities Commission of the State of
Arizona. See "Certain Transactions."

In December 1995, Dale dissolved and issued 51% and 49% respectively of its
Common Stock in the Company and its loans receivable due from the Company to
Riverlux Trust REG and Brett Bouchy. Riverlux Trust REG and Brett Bouchy
received 665,265 shares and 639,175 shares, respectively, of Dale's
stockholdings in the Company and $433,500 and $416,500, respectively, of Dale's
loans receivable from the Company. The loans were repaid out of proceeds of the
Prior Offering. Subsequently, Riverlux Trust REG and Mr. Bouchy each sold 20,000
shares of the Company's Common Stock to Mr. Kehoe for $2.00 per share.

The Company's current chewing gum products contain ingredients which it
claims (i) promote weight loss (under the "ChromaTrim" and "CitrusSlim" brand
names), (ii) contribute to energy and endurance (under the "Buzz Gum", "Power
Gum" and "Love Gum" brand names), (iii) alleviate certain premenstrual symptoms
(under the "Repose" brand name) and (iv) promote oral hygiene and breath
freshness (under the "DentaHealth" brand name). The Company also markets a
chewing gum product which includes antioxidant vitamins (under the "Vita A-C-E"
brand name). Sales of Power Gum and Love Gum commenced in 1994 while sales of
Buzz Gum, ChromaTrim and CitrusSlim commenced in 1991, 1993 and 1995,
respectively. The Company began distribution of Repose, DentaHealth and Vita
A-C-E in April 1996.

The Company contracted with others for the manufacture of all its chewing
gum products until February 1996 when it completed leasehold improvements and
began initial manufacture of chewing gum products in its 28,000 square foot
manufacturing facility in Phoenix, Arizona. The facility employs 28 workers and
produces all of the Company's chewing gum products. See "- Manufacturing and
Packaging."

Strategy

The Company intends to apply proceeds of the Prior Offering and revenues
generated from the sale of its chewing gum products to pursue the following
business strategy:

(i) Manufacture its own chewing gum products. The Company will continue to
manufacture its chewing gum products under its own labels and on a private label
basis for other chewing gum marketers. The Company believes that operating its
own manufacturing facility significantly reduces its dependence on third party
manufacturers, assists it in maintaining the secrecy of its proprietary chewing
gum formulas, reduces its product costs and increases product capacity for
itself and its large volume customers.

<PAGE>

(ii) Increase revenues by expanding its marketing efforts for existing
chewing gum products, developing new chewing gum products and further developing
its private label business. The Company will continue to expand marketing
efforts for existing products (both in the United States and internationally)
and to further develop its private label business in order to manufacture more
chewing gum products for other chewing gum marketers. The Company will continue
to develop new specialty chewing gum products, such as the three new specialty
products it recently introduced (Vita A-C-E, Repose and DentaHealth), for itself
and its private label customers. Because the Company is significantly smaller
than most of its competitors, it intends to develop, manufacture and market
specialty chewing gum products in niche markets that are considered too small
for exploitation by many of these competitors. Development of these products
will be undertaken at the Company's research and development laboratory facility
located within the Company's manufacturing facility in Phoenix, Arizona. The
research and development facility consists of 900 square feet of laboratory
space staffed by two employees.

(iii) Expand its distribution and customer base by adding OTC medications
(such as antacids, cough suppressants, pain relievers and the like) to its
chewing gum products. The Company has certain OTC chewing gum products in
development and expects to explore market potential for a number of such
products in the near future. The Company believes that OTC chewing gum products
may appeal to certain retailers (such as drug stores and health food stores) and
offer the Company the potential to develop new consumer niche markets. Any such
OTC chewing gum products will require FDA permission to market and will be
subject to ongoing FDA marketing and manufacturing regulations. See "- FDA and
Other Government Regulation."

Marketing

The Company markets its products through wholesale distributors who
distribute primarily to natural food stores and through other brokers, marketers
and distributors to convenience stores and independent grocery and drug stores.
The Company also markets to chain grocery, drug and club stores through brokers
and distributors or directly in the case of club stores. The Company has
non-binding distribution agreements with distributors in North America, South
America, Europe, Asia and Australia.

The Company also manufactures and private labels certain specialty chewing
gum products to retail health food chains, wholesalers and other marketers,
including Schiff/Weider Nutrition, General Nutrition Centers (GNC), Hammer
Corp., Jack LaLanne and Body Ammo. Under private label arrangements, the Company
supplies chewing gum products (including formulas used by the Company and its
customers) labeled with brand names selected by its private label customers or
otherwise includes the private label customer's name on the gum product
packaging. For instance, the Company's Jack LaLanne line of private label
chewing gum includes the Company's Power Gum, DentaHealth, Love Gum and
ChromaTrim products marketed under the Jack LaLanne label.

<PAGE>

In January 1996, the Company entered into a five-year agreement (the
"Mayday Agreement") with Mayday, Inc. ("Mayday") pursuant to which it retained
Mayday to oversee and administer the Company's sales agents, brokers and
distributors in certain defined "Target Markets." Mayday's services include (i)
assisting the Company in selection of sales agents and brokers, (ii) reviewing
and submitting purchase orders to the Company, (iii) collecting receivables due
from sales agents and brokers, (iv) submitting monthly sales reports to the
Company covering the activities of the Company's sales agents and brokers and
(v) administering sales and marketing activities in the Target Markets including
selection of new sales agents and brokers and enforcement of Company selling
policies and procedures.

"Target Markets" are defined in the Mayday Agreement as all markets in
which the Company operates except (i) the natural food markets, (ii) private
label markets, (iii) markets developed from direct response television
infomercial advertising, (iv) international markets and (v) markets addressed by
Bernstein Bros. Marketing Corporation, doing business as National Distributing
("National Distributing"), which generally involve sales of ChromaTrim and
CitrusSlim to non-chain convenience stores, grocery stores, drugstores and other
similar retail food stores.

Under the Mayday Agreement, Mayday is entitled to receive commissions
during the first year (ending December 31, 1996) equal to (i) 10% of Net Sales
(defined as gross sales in the Target Markets) up to $2 million of Net Sales,
(ii) 7% of Net Sales between $2 million and $3 million, (iii) 5% of Net Sales
between $3 million and $4 million and (iv) 3% of Net Sales in excess of $4
million. In subsequent years, Mayday is entitled to receive commissions equal to
3% of Net Sales up to the prior year's Net Sales and 5% of Net Sales in excess
of the prior year's Net Sales.

In January 1996, the Company entered into a two-year distribution agreement
with Bernstein Bros. Marketing Corporation (doing business as National
Distributing) (a company in which Richard Bernstein, an officer and director of
the Company, is President, a director and a principal stockholder) pursuant to
which the Company agreed to sell to National Distributing at fixed prices on a
non-exclusive basis ChromaTrim and CitrusSlim chewing gum for distribution by
National Distributing solely to non-chain convenience stores, grocery stores,
drugstores and other similar retail food stores. There are no minimum sales
requirements imposed under the agreement. The Company considers the product
prices offered to National Distributing under the agreement to be fair,
reasonable and consistent with product prices which would be offered to
unaffiliated distributors. Sales by National Distributing of ChromaTrim chewing
gum under a prior distribution agreement with the Company accounted for 42.8%
and 62.4% of the Company's total sales for the years ended December 31, 1995 and
1994, respectively, and 18.7% of total sales for the six months ended June 30,
1996. A loss of National Distributing as a distributor could have a material
adverse effect on the Company's operations.

<PAGE>

pursuant to which the Company agreed to sell to UMI at fixed prices on a
non-exclusive basis ChromaTrim and CitrusSlim chewing gum for distribution by
UMI solely in the United States through direct response television infomercial
advertising. There are no minimum sales requirements imposed under the
agreement. The Company considers the product prices offered to UMI under the
agreement to be fair, reasonable and consistent with product prices which would
be offered to unaffiliated distributors. Sales by UMI of ChromaTrim chewing gum
under a prior distribution agreement with the Company accounted for 26.7% and 0%
of the Company's total sales for the years ended December 31, 1995 and 1994,
respectively, and 5.2% of total sales for the six months ended June 30, 1996.

The Company intends to continue to expand its marketing efforts by (i)
hiring additional sales personnel to obtain and manage new brokers and
distributors, (ii) developing media advertising materials for use by the Company
and its brokers and distributors and (iii) retaining personnel to further
develop the Company's private label business and seek other forms of contract
manufacturing business.

Manufacturing and Packaging

In February 1996, the Company began manufacturing, packaging and shipping
its chewing gum products from a 28,000 square foot leased manufacturing facility
in Phoenix, Arizona. The manufacture of chewing gum products involves (i) the
storage of bulk raw materials and "fine" raw materials (such as flavor, colors
and active ingredients), (ii) production and mixing of the gum base in large
stainless steel mixers, (iii) the extruding of the gum into selected sizes and
shapes, (iv) coating the gum (in the case of chicklet gums) with sugar or
sugarless solutions and (v) packaging the gum in stick or blister packages for
shipment.

Prior to commencing production of the chewing gum, lot numbers are recorded
for all ingredients, certificates of ingredients are examined and filed, quality
control tests are performed and equipment and utensils are sanitized. Additional
quality control tests are conducted throughout the manufacturing process.

The Company leases approximately $2 million of chewing gum manufacturing
equipment on a six-year lease at a monthly rental of $32,300 from Textron
Financial Corporation. The Company has the option to purchase the equipment at
the conclusion of the lease for the lesser of the then fair market value of the
equipment or 30% of the original cost of the equipment. The Company's
manufacturing facility is expected by the end of 1996 to produce most of the
Company's chewing gum products and provide the capacity to meet most of the
Company's private label product requirements for the foreseeable future. Until
that time, the Company will continue to contract for the manufacture of a small
portion (currently 5%) of its chewing gum products with Ford Machine Gum
Company, Inc. ("Ford"). The Company's manufacturing agreement with Ford expires
in March 1997, however should Ford terminate the agreement earlier for any
reason, the Company's operations would be adversely affected. See "Risk Factors
- - Reliance on Manufacturer." Although certain of the Company's executive
officers have experience in the manufacture of chewing gum products, the Company
itself had not previously engaged in any such activities.

<PAGE>

Competition

The distribution and sale of chewing gum products are highly competitive
and consist of three multi-billion dollar United States-based multinational
companies (Wm. Wrigley Jr. Company, Warner Lambert Company and Nabisco Food
Group, Inc.) which own most of the chewing gum brands, large specialty chewing
gum manufacturers, such as The Topps Company ("Bazooka" brand chewing gum) and
Marvel Holdings, Inc. ("Double Bubble" brand chewing gum), and small specialty
chewing gum product marketers, such as the Company. See "Risk Factors -
Competition."

Competitive factors in the chewing gum industry include price, flavor and
name recognition resulting from media advertising. The Company does not have the
capital resources, marketing and distribution networks, manufacturing
facilities, personnel, product name recognition or advertising budget to
introduce chewing gum brands intended to compete with the multinational chewing
gum manufacturers or the large specialty chewing gum marketers. However, the
Company believes (but cannot assure) that it can develop and market specialty
chewing gum products in niche markets (such as the weight loss, vitamin,
premenstrual symptom or dental hygiene markets) that are considered too small
for exploitation by many of the Company's competitors.

FDA and Other Government Regulation

The Company is subject to various federal, state and local laws affecting
its business. The Company's chewing gum products manufactured by it or by others
for it under contract or otherwise are subject to regulation by the FDA
including regulations with respect to labeling of products, approval of
ingredients in products, claims made regarding the products and disclosure of
product ingredients. Moreover, if the FDA concludes that any of the Company's
chewing gum products are "drugs" under applicable FDA regulations or otherwise
violate FDA rules or regulations, the FDA may (i) require that manufacture of
such products be in accordance with FDA "good manufacturing practices" (which
prescribe specific requirements and procedures for the manufacture of FDA
regulated products), or (ii) restrict or remove such products from the market.
The Company (i) has received one Warning Letter from the FDA relating to the
Company's Buzz Gum product (see the paragraph below), (ii) believes all of its
products are in compliance with all regulatory requirements, (iii) has not been
advised that the FDA considers any of its products to be "drugs", and (iv) has
not submitted any information or applications for approval to the FDA, other
than the label revisions for Buzz Gum described in the paragraph below. If the
Company commences marketing OTC chewing gum products, such products will be
subject to marketing permission and ongoing regulation by the FDA including (i)
requirements that the Company comply with certain FDA manufacturing standards
and practices, (ii) conformity with FDA labeling requirements including dosage
information and (iii) the ability to determine the origin of all chewing gum
ingredients included in the manufacturing process.

<PAGE>

Advertising claims made by the Company with respect to its products are
subject to the jurisdiction of the FTC as well as the FDA. In both cases the
Company is required to obtain scientific data to support any advertising or
labeling health claims it makes concerning its products, although no
preclearance or filing is required to be made with either agency.

The Company's chewing gum manufacturing facility is subject to regulation
by various governmental agencies, including state and local licensing, zoning,
land use, construction and environmental regulations and various health,
sanitation, safety and fire codes and standards. Suspension of certain licenses
or approvals, due to failure to comply with applicable regulations or otherwise,
could interrupt the Company's manufacturing operations. If the Company commences
marketing OTC chewing gum products, its manufacturing facility will also be
subject to inspection and regulation by the FDA.

The Company is subject to federal and state laws establishing minimum wages
and regulating overtime and working conditions. Since many of the Company's
personnel are paid at rates based on the federal minimum wage, an increase in
such minimum wage will result in an increase in the Company's labor costs.

Trademarks, Trade Names and Proprietary Rights

The Company has obtained trademark protection from the United States Patent
Office ("USPO") for its "ChromaTrim" and "Buzz Gum" brands and has applied for
trademark protection for its "Repose", "DentaHealth", "Vita A-C-E" and
"CitrusSlim" brands. There can be no assurance that the Company would be able to
successfully defend its trademarks or trade names against claims from or use by
competitors or that current or future trademark or trade name applications will
be approved by the USPO.

The Company considers some of its chewing gum formulations and processes to
be proprietary in nature and relies upon a combination of non-disclosure
agreements, other contractual restrictions and trade secrecy laws to protect
such proprietary information. There can be no assurance that these steps will be
adequate to prevent misappropriation of the Company's proprietary information or
that the Company's competitors will not independently develop chewing gum
formulations and processes that are substantially equivalent or superior to the
Company's.

<PAGE>

Properties

The Company leases 3,345 square feet for its executive of ices at 4205
North 7th Avenue, Phoenix, Arizona 85013 on a three-year lease expiring December
31, 1998 for an average rental of approximately $2,900 per month. The Company
also leases an approximately 28,000 square foot building for its chewing gum
manufacturing facilities at 246 East Watkins, Phoenix, Arizona 85004 on a
ten-year lease (with two three-year renewal options) expiring December 2005 at a
monthly rental of approximately $11,000.

Employees

As of September 30, 1996, the Company employed 41 individuals including its
six executive officers, 28 manufacturing and warehouse personnel and seven
administrative personnel.

Litigation

There is no material litigation pending or threatened against the Company
except a threat of litigation involving an individual who claims he was entitled
to receive options to purchase 20,000 shares of the Company's Common Stock and
other remuneration in consideration of becoming a director and employee of the
Company. The Company denies that the individual ever became a director or
employee of the Company and does not believe he is entitled to stock options or
other compensation for any reason. The Company intends to vigorously defend any
action brought against it by the individual.

<PAGE>
MANAGEMENT

Officers and Directors

The name, age and position of each of the Company's executive officers and
directors are set forth below:

Name Age Position
---- --- --------
Richard Ratcliff(2) 61 Chairman of the Board of Directors and
Senior Vice President
Gerald N. Kern 58 Chief Executive Officer, President and
Director
John E. Epert(1)(2) 55 Vice Chairman of the Board of Directors
and Executive Vice President
Gary S. Kehoe 38 Chief Operating Officer and Director
Richard Bernstein 36 Vice President of Sales and Director
Jeffrey L. Bouchy 31 Secretary, Treasurer and Chief Financial
Officer
William G. Meris(1)(2) 30 Director
Gregory W. Gossett 28 Director
Woodrow C. Monte (1) 52 Director

- ----------
(1) Member of the Audit Committee.
(2) Member of the Stock Option Plan/Compensation Committee.

Directors hold office for a period of one year from their election at the
annual meeting of stockholders or until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. The Company's executive officers were all leased
employees from the commencement of their employment with the Company through
December 31, 1995, when the Company's employee leasing agreement was cancelled
by it. In August 1996 and May 1996, respectively, Messrs. Earl K. Manhold III
and Robert H. Wood resigned as directors and in August 1996, Mr. Meris was
elected a director. In August 1996, (i) Mr. Ratcliff resigned as the Company's
Chief Executive Officer and was appointed its Chairman and Senior Vice
President, (ii) Mr. Epert resigned as President of the Company and was appointed
its Vice Chairman and Executive Vice President and (iii) Gerald N. Kern was
appointed Chief Executive Officer, President and a director.

Background

The following is a summary of the business experience, for at least the
last five years, of each executive officer and director of the Company:

Richard Ratcliff became Chief Executive Officer and a director of the
Company in March 1995. Mr. Ratcliff was the co-founder with Mr. Epert and an
executive officer of Food For Health Co., Inc., a health food distributor, from
1971 until he sold the company with Mr. Epert in 1991. From 1991 until he became
Chief Executive Officer of the Company in March 1995, he was a passive

<PAGE>

investor for his own account. Since 1991, he has also been President of Niche,
Inc., a privately-held company through which he provides consulting services on
matters relating to the natural food industry. Mr. Ratcliff is also (i) a
director of First Community Financial Corp., an asset-based lender, (ii) a
salaried officer, director and principal stockholder of Meris Financial, Inc., a
privately-held investment firm, and (iii) was formerly a director of Interhealth
Nutritionals, Inc., a privately-held producer of health food ingredients,
including an ingredient used by the Company in one of its chewing gum products.
See "Certain Transactions." None of Mr. Ratcliff's other positions requires any
of his time during normal business hours and, accordingly, he devotes
substantially all of his time to the affairs of the Company. Mr. Ratcliff
resigned as the Company's Chief Executive Officer in August 1996 and is
currently Chairman of the Board of Directors and Senior Vice President of the
Company.

Gerald N. Kern became the Company's Chief Executive Officer, President and
a director in August 1996. From 1983 to 1994, he was President and Chief
Operating Officer of Meditech Pharmaceuticals, Inc., a manufacturer of
proprietary drugs. From August 1994 until August 1996, he was President of Aura
Interactive, a manufacturer of interactive consumer products. Prior to serving
at Meditech, Mr. Kern was the Executive Vice President and Chief Operating
Officer of Max Factor, one of the world's largest cosmetics companies, from 1977
to 1980. Mr. Kern was a division President and corporate Vice President for
International Playtex from 1967 to 1977.

John E. Epert became a director of the Company in April 1995, its Chairman
in August 1995 and its President in January 1996. He was the co-founder with Mr.
Ratcliff and President of Food For Health Co., Inc., a health food distributor,
from 1971 until he sold the Company with Mr. Ratcliff in 1991. From 1991 until
he became the Company's Chairman in August 1995, he acted as a passive investor
for his own account. He is a director of Unitech Industries, Inc., a
publicly-held cellular phone accessory manufacturer, and First Community
Financial Corp., an asset based lender. Mr. Epert resigned as the Company's
President in August 1996 and is currently Vice Chairman and Executive Vice
President of the Company.

Gary S. Kehoe was employed by LifeSavers Company, a division of Nabisco
Food Group, Inc., in various capacities from 1976 until he joined the Company in
June 1995 as its Chief Operating Officer and a director. As a Senior Food
Technologist for LifeSavers, Inc., Mr. Kehoe developed six bubble gum flavors
and was listed as an inventor or co-inventor on 12 U.S. chewing gum patents
filed by Lifesavers, Inc.

Richard Bernstein joined the Company in January 1996 as its Vice President
of Sales. Since 1991, he has also been President, a director and principal
stockholder of Bernstein Bros. Marketing Corporation (doing business as National
Distributing). Mr. Bernstein is not required to spend any time during normal
business hours as an officer and director of National Distributing and,
accordingly, he devotes substantially all of his time to the affairs of the
Company. National Distributing markets retail consumer products including the
Company's ChromaTrim and CitrusSlim chewing gum products. See "Business -
Marketing" and "Certain Transactions." Mr. Bernstein graduated from the
University of Southern California in 1981 with a Bachelor of Science degree and
became a director of the Company in April 1995.

<PAGE>

Jeffrey L. Bouchy earned his Bachelor of Science degree in Accounting from
Arizona State University in 1989 and his Master of Science degree in Sports
Management from West Virginia University in 1992. From 1992 to 1993, he was
assistant to the Director of Finance at the Charlotte Coliseum, a sports and
events facility in Charlotte, North Carolina. From 1993 until 1994, he was
President of Southwest Food Services, Inc., a privately-held fast food franchise
based in Phoenix, Arizona. From 1994 until he joined the Company in May 1995 as
its Chief Financial Officer, he was a production manager at Fun Tees, Inc., a
privately-held apparel manufacturer. Brett Bouchy, a former principal
stockholder of the Company, is Jeffrey L. Bouchy's brother.

William G. Meris was employed by Prudential Securities, Inc. from 1987
until 1994, first as an intern in the Corporate Finance Department, and then as
a retail stockbroker from 1989 until April 1994. Subsequently, he was employed
as a retail stockbroker by Franklin-Lord, Inc. from May 1994 to August 1994.
From October 1994 until March 1995, Mr. Meris was a co-owner of Cyberia, Inc., a
virtual reality entertainment firm. From January 1995 until June 1995, he was
also a co-manager of Meris Financial, Inc., a private investment and consulting
company. Since June 1995, Mr. Meris has been President of WGM Corporation, which
acts as the General Partner of The Monolith Fund, a private investment limited
partnership. He is also a director of Interhealth Nutritionals, Inc. He earned a
Bachelor of Science degree in Business Administration from Arizona State
University.

Gregory W. Gossett founded the Company in 1991 and was its President until
March 1995. Since March 1995, Mr. Gossett has acted as a marketing consultant to
the Company assisting the Company in developing and securing private label and
health food customers. He is paid, without a written contract, the sum of $2,000
per month for these consulting services, which services may be cancelled by
either party at any time without prior notice. From 1988 to 1990, Mr. Gossett
attended the University of Utah, emphasizing marketing courses. He also acts as
a self-employed real estate investor and consultant.

Woodrow C. Monte holds Master of Science and Ph.D. degrees in Food Science
and Nutrition from Colorado State University. Since 1981, he has been Director
of the Food Science and Nutrition Laboratories at Arizona State University. He
joined the Company as a director in April 1995.

Significant Employee

Richard A. Sigtermans was Manager of Quality Control and Information
Systems for the Company from October 1995 until his promotion to Production
Manager in September 1996. In such capacity, Mr. Sigtermans is responsible for
chewing gum production and also administers the Company's management information
and quality assurance departments. From 1991 to 1993, he was employed by
Lifesavers Company, a division of Nabisco Food Group, Inc., in its new product

<PAGE>

development group. From 1993 until he joined the Company in October 1995, he was
employed by Compac Corporation, a division of TriMas Corporation, first as its
Quality Project Coordinator and then as its Computer Operations Supervisor. Mr.
Sigtermans graduated from GMI Engineering & Management Institute with a Bachelor
of Science degree in 1991.

Executive Compensation

None of the Company's executive officers or directors currently receive
compensation in excess of $100,000 per year except Mr. Kern, the Company's Chief
Executive Officer who receives a salary of $150,000 per year, together with the
bonus and other consideration described below.

In March 1995, the Company entered into an employment agreement (the
"Employment Agreement") employing Mr. Ratcliff as the Company's Chief Executive
Officer through December 31, 1996, based upon a salary of $5,000 per month
together with a bonus equal to 7.5% of the Company's annual net operating income
in excess of $400,000. In March 1996, Mr. Ratcliff waived (i) his right to earn
a 7.5% bonus based upon the Company's annual net operating income and (ii) his
right to terminate the Employment Agreement and receive a $250,000 severance
payment from the Company if the Company did not file a Registration Statement on
Form SB-2 for an initial public offering by December 1995. The Employment
Agreement provided for the issuance to Mr. Ratcliff of stock options to purchase
up to 520,000 shares of Common Stock at $1.50 per share at any time until March
24, 1998 and the extension of a $100,000 loan to Mr. Ratcliff bearing interest
at 8% per annum due December 31, 1996. The purpose of the loan was to supplement
Mr. Ratcliff's first year salary of $60,000 which the Company and Mr. Ratcliff
considered low for the position of Chief Executive Officer of the Company. For a
description of Mr. Ratcliff's (and other employees') stock options, see "- 1995
Stock Option Plan." In August 1996, Mr. Ratcliff resigned as the Company's Chief
Executive Officer, voluntarily terminated his employment agreement and was
appointed the Company's Senior Vice President for which he currently receives a
salary of $2,000 per month pursuant to an August 1996 employment agreement which
also extended the due date of Mr. Ratcliff's loan from the Company to December
31, 1997.

On June 1, 1995, the Company entered into employment agreements with
Messrs. Manhold, Kehoe and Bouchy which provided for annual salaries and stock
options as follows.

Name of Executive Officer Annual Salary Stock Options (1)
----------------- --------------------- -----------------
Earl K. Manhold, III (2) $86,000 60,000
Gary S. Kehoe (3) $70,000 50,000
Jeffrey L. Bouchy (4) $38,000 20,000

- ----------

(1) All stock options are exercisable at $2.00 per share until June 1, 1998. In
January 1996, Mr. Manhold exercised his 60,000 stock options.

<PAGE>

(2) Does not include an aggregate of $8,185 paid to Mr. Manhold for living
expenses incurred between June 1995 and September 1995.
(3) Gary S. Kehoe's employment agreement terminates on December 31, 2000, and
provides for annual salaries in the second through fifth year of employment
in the amounts of $80,000, $88,000, $96,800 and $106,500, respectively. Mr.
Kehoe is also entitled to receive bonuses of (i) $10,000 upon completion of
the Company's manufacturing facility, (ii) $10,000 at such time as newly
introduced chewing gum product reaches $250,000 in gross sales during any
consecutive 360 day period, (iii) $100,000 at such time as any chewing gum
product reaches $5,000,000 in gross sales during any consecutive 360 day
period and (iv) an additional $100,000 at such time as any chewing gum
product reaches $10,000,000 in gross sales during any consecutive 360 day
period. Bonuses will be paid each year gross sales reach the targeted
levels. In 1995 and 1996, Mr. Kehoe received a total of $83,000 for certain
relocation expenses.
(4) Jeffrey L. Bouchy's employment agreement terminates on December 31, 1996.
In August 1996, his salary was increased to $60,000 annually.

In January 1996, Mr. Manhold resigned as President and entered into a
severance agreement with the Company pursuant to which the Company agreed to pay
Mr. Manhold his full salary for a period of three months and 50% of his salary
for the following nine months, (a total severance payment of $53,750) after
which time the Company would not be responsible for any further payments under
Mr. Manhold's employment agreement. At the same time, Mr. Epert was appointed
President of the Company pursuant to a one-year employment contract under which
the Company agreed to pay him an annual salary of $43,000 through December 31,
1996. The Company also advanced a loan to Mr. Epert in the amount of $150,000
bearing interest at 8% per annum, due January 29, 1998 to supplement Mr. Epert's
first year salary of $43,000 which the Company and Mr. Epert considered low for
the position of President of the Company. In August 1996, Mr. Epert resigned as
President of the Company, voluntarily terminated his employment agreement and
was appointed the Company's Executive Vice President for which he currently
receives a salary of $2,000 per month pursuant to an August 1996 employment
agreement.

In January 1996, the Company entered into an employment agreement with Mr.
Bernstein through December 31, 2000 which may be extended until December 31,
2005 at Mr. Bernstein's option if the Company's Net Sales (as hereinafter
defined) for the calendar year ending December 31, 2000 exceed $50 million.
Under the employment agreement, Mr. Bernstein is to receive a base salary of
$100,000 with subsequent annual base salaries equal to 2% of the Company's prior
year's Net Sales but in no event may such annual base salary exceed $500,000.
"Net Sales" are defined as gross sales from the sale of all products in the
"Target Markets," which in turn are defined as all markets except (i) the
natural food markets, (ii) private label markets or (iii) markets developed from
direct response television infomercial advertising. In addition, Mr. Bernstein
is entitled to an annual bonus equal to (i) 5% of the first $5 million of Net
Sales in excess of the prior year's Net Sales, (ii) 4% of the next $5 million of
Net Sales in excess of the prior year's Net Sales, (iii) 3% of the next $5
million of Net Sales in excess of the prior year's Net Sales and (iv) 2% of all
Net Sales in excess of $20 million of Net Sales in the prior year.

<PAGE>

On August 21, 1996, the Company entered into an employment agreement with
Mr. Kern through December 31, 1997 extendable at the Company's option for an
additional one year. Under the employment agreement, Mr. Kern receives a salary
of $150,000 per year, was granted an option to purchase 50,000 shares of the
Company's Common Stock at $6.00 per share under the 1995 Stock Option Plan and
was advanced a loan of $66,000 from the Company. Mr. Kern will also receive a
$25,000 bonus on January 15, 1997 if the Company reports pretax net income for
the fourth quarter of 1996, 5% of the Company's net income for the year ending
December 31, 1997 and 5% of the Company's net income for the year ending
December 31, 1998, if his employment is extended for the 1998 calendar year.

The following table discloses certain compensation paid to the Company's
executive officers for the years ended December 31, 1993, 1994 and 1995.

<TABLE>
<CAPTION>
Summary Compensation Table

Long Term Compensation
Annual Compensation Awards Payouts
------------------- -----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name
and
Prin- Other All
cipal Annual Restricted Other
Posi- Compen- Stock Options/ LTIP Compen-
tion Year Salary($) Bonus($) sation($) Award(s)($) SARS(#) Payouts($) sation($)
- ---- ---- --------- -------- --------- ----------- ------- ---------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gregory W. 1993 28,500 0 0 0 0 0 0
Gossett, 1994 26,460 0 0 0 0 0 0
President 1995 0 0 31,000(2) 0 0 0 0

Richard
Ratcliff,
Chief
Executive
Officer 1995 27,500 0 0 0 520,000(1) 0 0

- ----------
</TABLE>

(1) Represents options to purchase up to 520,000 shares at $1.50 per share
until March 1998.

(2) Represents consulting fees paid by the Company.

<PAGE>

Option Grants in Last Year and Stock Option Grant

The following table provides information on option grants during the year
ended December 31, 1995 to the named executive officer:

<TABLE>
<CAPTION>
% of Total
Options Granted
Options to Employees Exercise Expiration
Name Granted (1) in the Year Price Date
---- ----------- ----------- ----- ------------

<S> <C> <C> <C> <C>
Richard Ratcliff 520,000 69.3% $1.50 March 25, 1998
</TABLE>

- ----------
(1) See footnote (1) to the Summary Compensation Table.

Aggregate Option Exercise in Last Year and Year-End Option Values

The following table provides information on the value of the named
executive officer's unexercised options at December 31, 1995. No shares of
Common Stock were acquired upon exercise of options during the year ended
December 31, 1995.

<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money Options
Options at Year End (1) at Year End (1)
----------------------- ---------------

Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C>
Richard Ratcliff 520,000 0 $2,340,000 0
</TABLE>

- ----------
(1) The Common Stock price is based upon the $6.00 per share price of the
Common Stock in the Offering.

The Company's nonsalaried directors receive reimbursement for out-of-pocket
expenses incurred in attending Board of Directors' meetings and have been
granted stock options under the Company's 1995 Stock Option Plan. See "-
Executive Compensation" and "- 1995 Stock Option Plan."

1995 Stock Option Plan

In March 1995, the Company adopted a stock option plan (the "Plan") which
provides for the grant of options intended to qualify as "incentive stock
options" and "nonqualified stock options" within the meaning of Section 422 of
the United States Internal Revenue Code of 1986 (the "Code"). Incentive stock
options are issuable only to eligible officers, directors, key employees and
consultants of the Company.

The Plan is administered by the Compensation Committee of the Board of
Directors which is comprised of nonemployee directors. At December 31, 1995, the
Company had reserved 1,500,000 shares of Common Stock for issuance under the
Plan. Under the Plan, the Board of Directors determines which individuals shall

<PAGE>

receive options, the time period during which the options may be partially or
fully exercised, the number of shares of Common Stock that may be purchased
under each option and the option price.

The per share exercise price of the Common Stock may not be less than the
fair market value of the Common Stock on the date the option is granted. No
person who owns, directly or indirectly, at the time of the granting of an
incentive stock option, more than 10% of the total combined voting power of all
classes of stock of the Company is eligible to receive incentive stock options
under the Plan unless the option price is at least 110% of the fair market value
of the Common Stock subject to the option on the date of grant.

No options may be transferred by an optionee other than by will or the laws
of descent and distribution, and during the lifetime of an optionee, the option
may only be exercisable by the optionee. Options may be exercised only during
the time the option holder is an employee of the Company or within 90 days of
termination of such employment if a Registration Statement on Form S-8 ("S-8")
covering the underlying shares was effective as of the date of termination of
employment. If an S-8 covering the underlying shares was not effective on the
date of termination, then the employee has one year following termination to
exercise the options. If an employee is terminated for cause, any unexercised
options will be cancelled as of the date of such termination. Options under the
Plan must be granted within three years from the effective date of the Plan and
the exercise date of an option cannot be later than three years from the date of
grant. Any options that expire unexercised or that terminate upon an optionee's
ceasing to be employed by the Company become available once again for issuance.
Shares issued upon exercise of an option will rank equally with other shares
then outstanding.

As of the date of this Prospectus, 760,000 currently unexercised options
have been granted under the Plan to officers, directors, employees and
consultants including 720,000 currently unexercised options granted to executive
officers and directors. The per share exercise prices represented the fair
market value of the Company's Common Stock at the date such options were
granted, based on prior sales of the Company's Common Stock. The table below
sets forth the total number of options issued to each executive officer and
director of the Company and the exercise price. Messrs. Manhold's, Kehoe's and
Bouchy's options are exercisable until June 1, 1998. All other options are
exercisable at various times through October 1998. No options have been
exercised except 60,000 options exercised by Mr. Manhold at $2.00 per share and
20,000 options exercised by Mr. Ratcliff at $1.50 per share.

<PAGE>

Total Number of
Name of Executive Options Issued Exercise Price
----------------- -------------- --------------
John E. Epert 20,000 $1.80
Richard Ratcliff 500,000 1.50
Gary S. Kehoe 50,000 2.00
Jeffrey L. Bouchy 40,000 2.00
Woodrow C. Monte 20,000 1.80
Robert H. Wood 20,000 2.00
William G. Meris 20,000 6.125
Gerald N. Kern 50,000 6.00
-------
TOTAL 720,000

<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information concerning the holdings of
Common Stock (without giving effect to any shares issuable upon exercise of the
Public Warrants or the Prior Representative's Unit Warrants) by each person who,
as of the date of this Prospectus, holds of record or is known by the Company to
hold beneficially or of record, more than 5% of the Company's Common Stock, by
each director, and by all directors and executive officers as a group. All
shares are owned beneficially and of record. The address of all persons (unless
otherwise noted in the footnotes below) is in care of the Company at 4205 North
7th Avenue, Phoenix, Arizona 85013.

Amount of Percent of
Name Ownership Class
- ---- --------- -----
John E. Epert(1) 128,000 2.6
Gerald N. Kern(2) 50,000 1.0
Richard Ratcliff(3) 520,000 9.6
Gary S. Kehoe(4) 190,000 3.8
Jeffrey L. Bouchy(5) 40,000 .8
Gregory W. Gossett 265,000 5.4
William G. Meris(6) 20,000 .4
Woodrow C. Monte(7) 20,000 .4
Richard Bernstein(8) 108,000 2.2
Riverlux Trust REG(9) 645,265 13.2
Karl B. Berger(10) 450,000 8.9
Bruce Jorgenson(11) 250,000 5.1
All officers and directors as
a group (9 persons)
(1)(2)(3)(4)(5)(6)(7)(8) 1,341,000 23.2

- ----------
(1) Includes options to purchase 20,000 shares of Common Stock at $1.80 per
share until April 1998.
(2) Includes options to purchase 50,000 shares at $6.00 per share until August
1999. Does not include an option to purchase 50,000 shares from Mr.
Ratcliff at $6.00 per share. See "Certain Transactions."
(3) Includes options to purchase up to 500,000 shares at $1.50 per share until
March 1998. Does not include an option held by Mr. Kern to purchase 50,000
shares from Mr. Ratcliff at $6.00 per share. See "Certain Transactions."
(4) Includes warrants to purchase 100,000 shares at $2.00 per share in
perpetuity and options to purchase 50,000 shares at $2.00 per share until
June 1998.
(5) Represents options to purchase 20,000 shares at $2.00 per share until June
1998 and 20,000 shares at $2.00 per share until October 1998.
(6) Represents options to purchase 20,000 shares at $6.125 per share until
August 1999.
(7) Represents options to purchase 20,000 shares at $1.80 per share until April
1998.
(8) Represents options to purchase 108,000 shares at $1.80 per share until
April 1998.

<PAGE>

(9) Riverlux Trust REG, whose address is Baahofstrasse 23, CH 6301, Zug,
Switzerland, is a Liechtenstein company wholly owned and controlled by
Willy P. Verhaegen, Hans P. Bruellman and Doris Moeckli.
(10) Includes warrants to purchase 150,000 shares at $2.00 per share exercisable
in perpetuity. Mr. Berger's address is 97 Patterson Road, Joliet, Illinois
60434.
(11) Dr. Jorgenson's address is 1580 Antelope Drive, #100, Layton, Utah 84041.

SELLING STOCKHOLDERS

In this Prospectus, the Company is registering (at its expense) 2,874,715
shares of Common Stock which may be sold from time to time in open market
transactions at prevailing market prices less customary selling commissions by
the Selling Stockholders whose names are listed in the table below. The Selling
Stockholders may use the Prospectus from time to time to offer the shares for
sale in transactions in which the Selling Stockholders may be deemed to be
"underwriters" within the meaning of the 1933 Act. The Selling Stockholders
acquired the shares in private placements of the Company's Common Stock in
November 1994 (for $.48 per share), in February 1995 (for $1.53 per share) and
in May 1995 (for $1.80 per share). Certain information concerning the
stockholdings of the Selling Stockholders is set forth below.

<TABLE>
<CAPTION>
Percentage
of Shares
Number of Number of Outstanding
Shares Number of Shares to be to be Owned
Owned Prior Shares Offered Owned After After
Name to Offering For Sale Offering Offering
---- ----------- -------- -------- --------

<S> <C> <C> <C> <C>
Craig Babcock 40,000 40,000 0 0
1904 Midwest Club
Oak Brook, IL 60521

Dr. Clyde Balch and
Ann C. Balch 20,000 20,000 0 0
645 Gallein Drive
Naples, FL 33940

Smith Barney Custodian For
H. Thomas Fehn 6,900 6,900 0 0
11755 Wilshire Blvd.
15th Floor
Los Angeles, CA 90025

<PAGE>
Percentage
of Shares
Number of Number of Outstanding
Shares Number of Shares to be to be Owned
Owned Prior Shares Offered Owned After After
Name to Offering For Sale Offering Offering
---- ----------- -------- -------- --------

<S> <C> <C> <C> <C>
Daniel J. Beaumont and
Gary Oswald 15,000 15,000 0 0
150 Northgate Road
Riverside, IL 60546

Karl H. Berger 300,000 300,000 0 0
P.O. Box 627
Joliet, IL 60434

W. D. Boone 32,780 32,780 0 0
4639 E. Gelding Drive
Phoenix, AZ 85032

John E. Brayton and
Lynn M. Brayton 39,340 39,340 0 0
835 Margaret Street
Des Plaines, IL 60016

Betty Buckley 3,000 3,000 0 0
4205 North 7th Avenue
Phoenix, AZ 85013

Lynn Crabtree 10,000 10,000 0 0
3023 Timberline Drive
Fort Madison, IA 52627

Terry D'Arcy 24,450 24,450 0 0
1520 W. Jefferson Street
Joliet, IL 60435

Lawrence Davis and
Cynthia J. Davis 18,000 18,000 0 0
1672 Lawrence Court
Wichita, KS 67206

<PAGE>

Percentage
of Shares
Number of Number of Outstanding
Shares Number of Shares to be to be Owned
Owned Prior Shares Offered Owned After After
Name to Offering For Sale Offering Offering
---- ----------- -------- -------- --------

<S> <C> <C> <C> <C>
Epert Charitable Remainder
Unit Trust (1) 8,160 8,160 0 0
215 W. Mouthview
Phoenix, AZ 85201

John Epert (1) 15,000 15,000 0 0
1219 ME Glendale, Ste. 25
Phoenix, AZ 85020

Peter Farrelly and
Robert L. Farrelly 14,000 14,000 0 0
837 5th Street, Apt. A
Santa Monica, CA 90403

Financial Freedom Fund 30,000 30,000 0 0
c/o Brown Russell
519 North James St.
Flagstaff, AZ 86001

Henry G. Funk 32,780 32,780 0 0
42 Briargate
Aurora, IL 60506

Gregory Gossett 208,000 208,000 0 0
1565 E. 775 South #11
Ogden, UT 84404

Ronald D. Hallstrom 4,000 4,000 0 0
3408 27th Avenue
Moline, IL 61265

Virginia Hellman 22,000 22,000 0 0
321 North Brighton
Burbank, CA 91506

<PAGE>

<S> <C> <C> <C> <C>
Irmgard Drilling &
Theodore Drilling JTTEN 14,000 14,000 0 0
4901 Galway Drive
Dublin, OH 43017

Paul Janssens 120,000 120,000 0 0
840 South Collier Blvd., #1701
Marco Island, FL 33937

John Epert Family Trust (1) 10,000 10,000 0 0
215 W. Northview
Phoenix, AZ 86258

Bruce Jorgenson 130,000 130,000 0 0
1580 West Antelope Drive
Layton, UT 84041

Gary Kehoe (1) 40,000 40,000 0 0
4205 North 7th Avenue
Phoenix, AZ 85013

Bradley Kelly 166 166 0 0
1524 Mount Road
Ogden, Ut 84404

Geraldine Kelly 2,000 2,000 0 0
1524 Mount Road
Ogden, UT 84404

Jason S. Kelly 834 834 0 0
1524 Mount Road
Ogden, UT 84404

George Knostman 14,000 14,000 0 0
801 W. Fairground Avenue
Hillsboro, IL 62049

Michael Lang 46,780 46,780 0 0
32 Forest Lane
South Barrington, IL 60010

<PAGE>

<S> <C> <C> <C> <C>
Gaylon Naifeh 20,000 20,000 0 0
2619 Madison Avenue
Burlington, IA 52601

Michael Nordstrom 11,900 11,900 0 0
18335 Lamplighter Court
Brookfield, WI 53045

Martin Oliveira and
Laurie Oliveira 1,400 1,400 0 0
44 Hamilton Court
Danville, CA 94526

Kendall Oltrooge 32,780 32,780 0 0
6416 North 31st
Phoenix, AZ 85016

J. Kley Partners 30,000 30,000 0 0
Edward D. Johnson, Jr.
324 N. Wilmette Avenue
Westmont, IL 60559

Traxlein Partners 15,000 15,000 0 0
William A. Traxel
5348 Gettysberg
Rockford, IL 61111

Edward Penry 5,500 5,500 0 0
529 Walden Drive
Palatine, IL 60062

Fehn & Sherwin SLB
Flex Prototype 6,900 6,900 0 0
11755 Wilshire Blvd.
15th Floor
Los Angeles, CA 90025

<PAGE>

<S> <C> <C> <C> <C>
Gary Richter/Richter Supply Inc. 20,000 20,000 0 0
401 K Profit Sharing Plan
1231 Channahon Road
Joliet, IL 60436

Riverlux Trust REG (2) 645,265 645,265 0 0
Bachofstrasse 23, CH 6301,
Zug, Switzerland

Sylvia Robinson 2,800 2,800 0 0
6528 W. Bloomfield
Glendale, AZ 85304

Gary Rudy IRA 28,000 28,000 0 0
1004 Lacross Street
Lacross, WI 54601

Wallace B. Ruminson &
Patti Ruminson JTEN 56,000 56,000 0 0
444 W. Putnam
Porterville, CA 93257

Robert Salomon 20,000 20,000 0 0
3875 Woodside Road
Woodside, CA 94062

Steve Scharman 10,000 10,000 0 0
4665 Signe Lane
Ogden, UT 84403

Lawrence R. Schroeder 14,000 14,000 0 0
35 Surrey Lane West
Barrington Hills, IL 60010

John D. Scott and
Jane Scott 14,000 14,000 0 0
30 Jackson Street
Sullivan, MO 63080

<PAGE>

<S> <C> <C> <C> <C>
Stewart Shanahan 3,000 3,000 0 0
4335 W. Sunnyside Avenue
Glendale, AZ 85304

Thomas Shuda 32,780 32,780 0 0
914 Buffalo Wilson Road
Colville, WA 99114

Alice J. Slanec
POD Alice J. Slanec
Trustee Alice J. Slanec 10,000 10,000 0 0
21148 N. 18th Street
Barrington, IL 60010

Douglas A. Smith 16,000 16,000 0 0
604 Mesa Court
Waukesha, WI 53188

Melissa J. Smith 5,000 5,000 0 0
47608 E. Bernell Drive
Phoenix, AZ 85020

Floyd Stalker 1,000 1,000 0 0
4205 North 7th Avenue
Phoenix, AZ 85013

John Stummer 10,500 10,500 0 0
3739 W. Irving Park Road
Chicago, IL 60618

James Swanson and
Abby Swanson 56,000 56,000 0 0
809 Zaininger Avenue
Naperville, IL 60563

Kenneth W. Swarts 39,340 39,340 0 0
3000 Bonacum Drive
Lincoln, NE 68502

<PAGE>

<S> <C> <C> <C> <C>
Templar Corporation 65,000 65,000 0 0
310 Madison Avenue
New York, NY 10017

Karen Tierney and
James Vawter 14,000 14,000 0 0
21428 Riverview Court
Salines, CA 93908

Josephine Tinimbang 14,400 14,400 0 0
4851 W. Greenleaf
Lincoln Wood, IL 60646

Willie Verhaegen 100,000 100,000 0 0
MECHSLSBSTEENWBG 148
B 2520 Edegem
Antwerpen
Belgium

David H. Welch 8,230 8,230 0 0
5917 N. Isabel
Peoria, IL 61614

John Whalen 4,000 4,000 0 0
2431 Alamo Glen Drive
Danville, CA 94526

Robert Wood 29,000 29,000 0 0
GNT Industries
3413 Eastern Avenue S.E.
Grand Rapids, MI 49508

Scott Wooley 6,000 6,000 0 0
995 West Glenn
Elk Grove Village, IL 60007

<PAGE>

<S> <C> <C> <C> <C>
Robert W. Wyatt 32,780 32,780 0 0
9595 Distribution Avenue
San Diego, CA 92121

George A. York 28,000 28,000 0 0
8020 North 13th Street
Pheonix, AZ 85020

John J. You 30,000 30,000 0 0
5550 N. Kenmore
Chicago, IL 60640

</TABLE>

- --------------------
(1) Messers. Epert and Kehoe are officers and directors of the Company.

(2) Riverlux Trust REG is a principal stockholder of the Company.

<PAGE>

CERTAIN TRANSACTIONS

The Company was incorporated on February 4, 1991. Between the date of
incorporation and November 1994, the Company issued an aggregate of 2,500,000
shares of its Common Stock to officers, directors and business associates for an
aggregate of $29,000, or $.012 per share.

In November 1994, Gregory W. Gossett, the Company's founder, President and
majority stockholder, sold 1,550,000 shares of his Common Stock in the Company
to Dale Holdings, LDC ("Dale") for $750,000, or $.48 per share. On the same
date, the Company sold an additional 516,740 shares to Dale for $250,000, or
$.48 per share. Accordingly, as of November 1994, Dale was the majority
stockholder of the Company, owning an aggregate of 2,066,740 shares, or 68.5% of
the Company's then outstanding Common Stock. At that time (and until December
1995) Dale was owned 51% by Riverlux Trust REG, a Liechtenstein company, and 49%
by Brett Bouchy. In January 1995 Dale purchased 24,850 shares from Miguel
Paloma, a nonaffiliated stockholder of the Company.

In February 1995, Dale sold an aggregate of 367,150 shares of Common Stock
of the Company held by it to a group of investors for $560,000, or $1.53 per
share. After paying commissions of $56,000, Dale loaned the remaining $504,000
to the Company, evidenced by a promissory note bearing interest at 8% per annum,
which was paid in full with proceeds of the Prior Offering. Proceeds of the loan
were used by the Company to (i) purchase inventory, (ii) provide Mr. Ratcliff
with the $100,000 loan required under his employment agreement, (iii) pay cash
dividends to the Company's stockholders aggregating $37,449, (iv) repay a
stockholder loan in the amount of $43,000, (v) pay legal and accounting fees and
(v) satisfy working capital needs, including the purchase of inventory.

On March 24, 1995, the Company entered into an employment agreement with
Richard Ratcliff, its Chief Executive Officer, which provides for a salary,
bonus and loan to Mr. Ratcliff. On June 1, 1995, the Company entered into
employment agreements with Messrs. Manhold, Kehoe and Bouchy. In January 1996,
the Company entered into employment agreements with Messrs. Epert and Bernstein
and in August 1996 the Company entered into an employment agreement with Mr.
Kern. Subsequently, Messrs. Ratcliff, Epert and Manhold voluntarily terminated
their employment agreements and Messrs. Ratcliff and Epert entered into new
employment agreements in August 1996, effective through December 31, 1997. See
"Management - Executive Compensation."

In May 1995, the Company sold 420,000 shares of its Common Stock to a group
of non-affiliated investors for $1.80 per share. At the same time, Dale also
sold 420,000 shares of the Company's Common Stock owned by it for $1.80 per
share to a group of investors.

In June 1995, Dale loaned the Company $346,000 evidenced by a promissory
note bearing interest at 8% per annum due the earlier of June 19, 1997, or the
closing date of the Offering. This second Dale loan resulted from the
aforementioned sale by Dale in May 1995 of 420,000 shares of the Company's

<PAGE>

Common Stock at $1.80 per share. The two loans from Dale which aggregate
$850,000 are collateralized by all of the Company's accounts receivable,
inventory and equipment (subordinated to the Textron Financial Corporation
equipment lease, see "Business - Manufacturing and Packaging") and were repaid
in full from the proceeds of the Prior Offering.

In April and October 1995, the Company issued 40,000 and 100,000 stock
options respectively to Meris Financial Incorporated ("Meris") for consulting
services rendered to the Company including services rendered in connection with
the Offering. The options were exercisable at $6.00 per share and were to expire
three years from the date of issuance. In March 1996, at the Company's request,
Meris agreed to cancel its options in order to assist the Company in compliance
with certain NASD rules which limit the number of options and warrants issuable
in connection with a public offering. Meris has not received, and will not
receive, any other compensation in connection with the Offering. Mr. Ratcliff is
an officer and director of Meris.

In October 1995, the Company borrowed $1,550,000 from a group of four
lenders (the "1995 Bridge Loan"). As additional compensation for the 1995 Bridge
Loan, the Company issued an aggregate of 465,000 common stock purchase warrants
to the lenders, each such warrant exercisable to purchase one share of the
Company's Common Stock at $2.00 per share exercisable in perpetuity. The Bridge
Loan bore interest at 8% per annum and was repaid in full from proceeds of the
Prior Offering. The Bridge Loan lenders included Brett Bouchy, a former
principal stockholder of the Company (who received 165,000 warrants), and Robert
H. Wood, a former director of the Company (who received 75,000 warrants). In
March 1996, Brett Bouchy sold 100,000 warrants to Gary S. Kehoe and 65,000
warrants to Robert H. Wood, both officers and directors of the Company, for
$5.00 per warrant. The purchase price was paid by the issuance of promissory
notes by Messrs. Kehoe and Wood to Mr. Bouchy bearing interest at 9% per annum.
The warrants are not collateral for the promissory notes. The promissory notes
are due the earlier of (i) six months after the warrants are exercised or (ii)
if during the period commencing from April 24, 1997 until April 24, 2000 the
closing price of the Company's Common Stock on NASDAQ is $10.00 or more per
share for five consecutive trading days then the promissory notes are due six
months from the last such trading day. If neither event occurs, the promissory
notes becomes void and of no value on April 24, 1999 and the warrants remain the
property of Messrs. Kehoe and Wood. Under no circumstances will the warrants
become returnable to Mr. Bouchy. Mr. Bouchy sold the warrants in response to
comments from the National Market who had advised the Company that neither
NASDAQ nor the National Market would list the Company's securities so long as
Mr. Bouchy was an equity holder in the Company. The National Market's objection
to allowing Mr. Bouchy to remain an equity holder in the Company resulted from
fines and censures imposed upon Mr. Bouchy by the NASD and the Securities
Commission of the State of Arizona.

<PAGE>

stockholdings in the Company and $433,500 and $416,500, respectively, of Dale's
loans receivable from the Company. The loans were repaid in full out of proceeds
of the Prior Offering. Subsequently, Riverlux Trust REG and Mr. Bouchy each sold
20,000 shares of the Company's Common Stock to Mr. Kehoe for $2.00 per share.

In January 1996, the Company repurchased from Brett Bouchy, the remaining
619,175 shares of the Company's Common Stock owned by him for $4.50 per share
resulting in a gain to Mr. Bouchy of $2,489,083. In order to fund the repurchase
and retirement of such shares, the Company sold in a January 1996 private
placement of its Common Stock an aggregate of 619,175 shares to the Selling
Stockholders for $4.50 per share after payment of commissions. The Company
repurchased Brett Bouchy's shares in response to comments from the National
Market as set forth in the carry over paragraph above. Without a NASDAQ or
National Market listing, the Company would be unable to complete a public
offering of its securities.

In January 1996, the Company entered into a two-year distribution agreement
with Bernstein Bros. Marketing Corporation (doing business as National
Distributing) (a company in which Richard Bernstein, an officer and director of
the Company, is President, a director and a principal stockholder) pursuant to
which the Company agreed to sell to National Distributing at fixed product
prices on a non-exclusive basis ChromaTrim and CitrusSlim chewing gum for
distribution by National Distributing solely to non-chain convenience stores,
grocery stores, drugstores and other similar retail food stores. There are no
minimum sales requirements imposed under the agreement. The Company considers
the product prices offered to National Distributing under the agreement to be
fair, reasonable and consistent with product prices which would be offered to
unaffiliated distributors. Sales by National Distributing of ChromaTrim chewing
gum under a prior distribution agreement with the Company accounted for 42.8%
and 62.4% of the Company's total sales for the years ended December 31, 1995 and
1994 respectively, and 18.7% of the Company's total sales for the six months
ended June 30, 1996. A loss of National Distributing as a distributor could have
a material adverse effect on the Company's operations.

In January 1996, the Company entered into a two-year distribution agreement
with Universal Merchants, Inc. ("UMI") (a company in which Richard Bernstein, an
officer and director of the Company was formerly a principal stockholder)
pursuant to which the Company agreed to sell to UMI at fixed product prices on a
non-exclusive basis ChromaTrim and CitrusSlim chewing gum for distribution by
UMI solely in the United States through direct response television infomercial
advertising. There are no minimum sales requirements imposed under the
agreement. The Company considers the product prices offered to UMI under the
agreement to be fair, reasonable and consistent with product prices which would
be offered to unaffiliated distributors. Sales by UMI of ChromaTrim chewing gum
under a prior distribution agreement with the Company accounted for 26.7% and 0%
of the Company's total sales for the years ended December 31, 1995 and 1994,
respectively, and 5.2% of the Company's total sales for the six months ended
June 30, 1996. In December 1994, the Company loaned National Distributing
$100,000 bearing interest at 8% per annum. The loan was repaid with $3,000
interest in March 1995. See "Business - Marketing."

<PAGE>

In January 1996, Earl K. Manhold III, a former director of the Company,
exercised options to purchase 60,000 shares of the Company's Common Stock at
$2.00 per share and sold such shares to John E. Epert, the Company's then
Chairman for the same price per share.

The Company has purchased, since 1994, an ingredient in its ChromaTrim gum
product from Interhealth Nutritionals, Inc., ("Interhealth"), a company in which
Mr. Ratcliff was formerly a member of the Board of Directors. The Company did
not pay a different price for the ingredient during the time Mr. Ratcliff was a
member of Interhealth's Board of Directors and the Company believes that the
price it has paid and currently pays for the ingredient is fair, reasonable and
consistent with prices charged by unaffiliated suppliers.

In January 1996, the Company loaned Mr. Epert $150,000 bearing interest at
8% per annum due January 29, 1998. See "Management - Executive Compensation."

In August 1996, Mr. Ratcliff granted Mr. Kern the option to purchase up to
50,000 shares of the Company's Common Stock held or purchasable by Mr. Ratcliff
for $6.00 per share at any time between February 1, 1998 and February 28, 1998
so long as Mr. Kern is employed by the Company at that time.

The Company believes that the terms of all agreements described above which
involve the Company's officers, directors, principal stockholders or affiliates
are fair, reasonable and consistent with terms that the Company could obtain
from unaffiliated third parties. All future agreements with officers, directors,
principal stockholders and affiliates will be approved by a majority of the
Company's disinterested directors.

<PAGE>
DESCRIPTION OF SECURITIES

Common Stock

The Company is authorized to issue 10,000,000 shares of common stock, no
par value (the "Common Stock"), of which 4,896,740 shares are currently
outstanding. In addition, the Company has issued the Public Warrants together
with common stock purchase warrants to purchase 465,000 shares at $2.00 per
share in perpetuity and stock options to purchase (i) 40,000 shares at $6.00 per
share at any time until April 1998, (ii) 100,000 shares at $6.00 per share at
any time until October 1998, and (iii) 360,000 shares at $1.80 per share at any
time until April 1998. The Company has also reserved for issuance up to
1,500,000 shares under the Company's 1995 Stock Option Plan, of which 760,000
shares are currently issuable at exercise prices between $1.50 and $6.00 per
share at any time through August 1999. In March 1996 the 40,000 and 100,000
previously issued options exercisable at $6.00 per share were cancelled by
Meris. See "Certain Transactions", see also "Capitalization" and "Management -
1995 Stock Option Plan."

Upon issuance, the shares of Common Stock are not subject to further
assessment or call. The holders of Common Stock are entitled to one vote for
each share held of record on each matter submitted to a vote of stockholders.
Cumulative voting for election of directors is not permitted. Subject to the
prior rights of any series of Preferred Stock which may be issued by the Company
in the future, holders of Common Stock are entitled to receive ratably such
dividends that may be declared by the Board of Directors out of funds legally
available therefor, and, in the event of the liquidation, dissolution or winding
up of the Company, are entitled to share ratably in all assets remaining after
payment of liabilities. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities. The
outstanding Common Stock is, and the Common Stock to be outstanding upon
completion of the Offering will be, validly issued, fully paid and
nonassessable.

Public Warrants

In connection with the Prior Offering, the Company issued 460,000 Public
Warrants. Each Public Warrant represents the right to purchase one share of
Common Stock at an exercise price of $7.50 per share at any time until April 24,
2001. The exercise price and the number of shares issuable upon exercise of the
Public Warrants are subject to adjustment in certain events including the
issuance of Common Stock as a dividend on shares of Common Stock, subdivisions
or combinations of the Common Stock or similar events. The Public Warrants do
not contain provisions protecting against dilution resulting from the sale of
additional shares of Common Stock for less than the exercise price of the Public
Warrants or the current market price of the Company's securities.

Public Warrants may be redeemed in whole or in part, at the option of the
Company after October 24, 1996, upon 30 days' notice, at a redemption price
equal to $.01 per Public Warrant if the closing price of the Company's Common
Stock on the National Market is at least $9.00 per share for 20 consecutive
trading days, ending not earlier than five days before the Public Warrants are
called for redemption.

<PAGE>

Holders of Public Warrants may exercise their Public Warrants for the
purchase of shares of Common Stock only if a current prospectus relating to such
shares is then in effect and only if such shares are qualified for sale, or
deemed to be exempt from qualification under applicable state securities laws.
The Company is required to use its best efforts to maintain a current prospectus
relating to such shares of Common Stock at all times when the market price of
the Common Stock exceeds the exercise price of the Public Warrants until the
expiration date of the Public Warrants, although there can be no assurance that
the Company will be able to do so.

The shares of Common Stock issuable on exercise of the Public Warrants will
be, when issued in accordance with the Public Warrants, fully paid and
non-assessable. The holders of the Public Warrants have no rights as
stockholders until they exercise their Public Warrants.

For the life of the Public Warrants, the holders thereof are given the
opportunity to profit from a rise in the market for the Company's Common Stock,
with a resulting dilution in the interest of all other stockholders. So long as
the Public Warrants are outstanding, the terms on which the Company could obtain
additional capital may be adversely affected. The holders of the Public Warrants
might be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital by a new offering of securities
on terms more favorable than those provided by the Public Warrants.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock, no
par value (the "Preferred Stock"), none of which is currently outstanding. The
Preferred Stock may, without action by the stockholders of the Company, be
issued by the Board of Directors from time to time in one or more series for
such consideration and with such relative rights, privileges and preferences as
the Board may determine. Accordingly, the Board has the power to fix the
dividend rate and to establish the provisions, if any, relating to voting
rights, redemption rates, sinking fund provisions, liquidation preferences and
conversion rights for any series of Preferred Stock issued in the future.

Use of Preferred Stock As Anti-Takeover Device

It is not possible to state the actual effect of any other authorization of
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of any other series of Preferred
Stock. The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the future
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and therefore, may be used as an "anti-takeover" device adversely

<PAGE>

affecting the holders of the Common Stock and depressing the value of the Common
Stock. The Company has no current plans to issue any Preferred Stock. See "Risk
Factors - Control by Management; Authorization and Issuance of Preferred Stock;
Prevention of Changes in Control."

Common Stock Eligible For Future Sale

Upon completion of the Offering, there will be 4,896,740 shares of Common
Stock outstanding, all of which have been registered for public sale and may be
immediately sold by the holders, subject only to the agreement by the holders of
2,874,715 shares (all of which are being registered hereby), who have entered
into a lock-up agreement with the Prior Representative on April 24, 1996
pursuant to which they agreed not to sell or otherwise dispose of any of their
shares of Common Stock until April 24, 1998 without the prior written consent of
the Prior Representative. Any future sales may adversely affect prevailing
market prices for the Common Stock and could impair the Company's ability to
raise capital through the sale of its equity securities. The Company has also
granted certain demand and piggyback registration rights with respect to the
Representative's Warrants and the Common Stock issuable upon exercise of the
Prior Representative's Warrants.

Transfer Agent and Warrant Agent

Corporate Stock Transfer, Inc., 370 Seventeenth Street, Suite 2350, Denver,
Colorado 80202, is the Company's transfer agent and warrant agent.

Dividends

In the past, the Company has paid limited cash dividends on its Common
Stock and does not intend to pay any cash dividends on its Common Stock in the
foreseeable future. Earnings, if any, will be retained to finance growth. The
Company has no financing or other agreements which prohibit payment of
dividends.

Limitation on Liability

The Company's Certificate of Incorporation provides that liability of
directors to the Company for monetary damages is eliminated to the full extent
provided by Utah law. Under Utah law, a director is not personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director except for liability arising from (i) a financial benefit received by
a director to which such director is not entitled, (ii) an intentional
infliction of harm on the Corporation or the shareholders, (iii) a violation of
Section 16-10a-842 of Utah Code annotated which prohibits certain distributions
by the Company of cash or property to affiliates, or (iv) an intentional
violation of criminal law.

The effect of this provision in the Certificate of Incorporation is to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages from a

<PAGE>

director for breach of the fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care or any liability for violation of the federal
securities laws.

LEGAL MATTERS

Certain legal matters in connection with the Offering will be passed upon
for the Company by the Law Office of Gary A. Agron, Englewood, Colorado.

EXPERTS

The financial statements of the Company for the years ended December 31,
1994 and 1995, appearing in this Prospectus and Registration Statement, have
been audited by Angell & Deering, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Financial Statements Page
- -------------------- ----
Independent Auditors' Report F-2

Balance Sheet as of June 30, 1996 (Unaudited)
and December 31, 1995 F-3

Statements of Operations for the six months
ended June 30, 1996 and 1995 (Unaudited) and
for the years ended December 31, 1995 and 1994 F-5

Statements of Changes in Stockholders' Equity
for the six months ended June 30, 1996 (Unaudited)
and for the years ended December 31, 1995 and 1994 F-6

Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 (Unaudited) and
for the years ended December 31, 1995 and 1994 F-7

Notes To Financial Statements F-9

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Gum Tech International, Inc.

We have audited the accompanying balance sheet of Gum Tech International, Inc.
as of December 31, 1995 and the related statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 1995 and
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gum Tech International, Inc. as
of December 31, 1995 and the results of its operations and its cash flows for
the years ended December 31, 1995 and 1994 in conformity with generally accepted
accounting principles.

/S/ ANGELL & DEERING
Angell & Deering
Certified Public Accountants

Denver, Colorado
January 18, 1996, except for
Note 9 and Note 12 as to which
the date is March 4, 1996

F-2

<PAGE>

GUM TECH INTERNATIONAL, INC.
BALANCE SHEETS

ASSETS

June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 3,317,729 $ 503,327
Accounts receivable, net of
allowance for doubtful
accounts of $10,555 and
$14,889, respectively 1,222,794 935,331
Inventories 1,459,880 898,665
Prepaid expenses and other 141,213 44,488
Deferred income taxes 215,412 --
----------- ----------

Total Current Assets 6,357,028 2,381,811
----------- ----------

Property and Equipment, at cost:
Machinery and equipment 3,228,515 990,274
Office furniture and equipment 79,097 35,316
Leasehold improvements 185,778 182,440
----------- ----------
3,493,390 1,208,030
Less accumulated depreciation (203,786) (20,274)
----------- ----------

Net Property and Equipment 3,289,604 1,187,756
----------- ----------

Other Assets:
Deposits 172,530 679,616
Notes receivable 264,931 100,000
Deferred offering costs -- 188,250
Other 142,203 54,311
Restricted Cash 102,758 --
----------- ----------

Total Other Assets 682,422 1,022,177
----------- ----------

Total Assets $10,329,054 $4,591,744
=========== ==========

The accompanying notes are an integral
part of these financial statements.

F-3

<PAGE>

GUM TECH INTERNATIONAL, INC.
BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

June 30, December 31,
1996 1995
---------- ------------
(Unaudited)
Current Liabilities:
Accounts payable $ 535,036 $ 399,824
Accrued expenses:
Income taxes -- 24,408
Customer deposits -- 36,959
Current portion of long-term debt 221,749 --
----------- ----------

Total Current Liabilities 756,785 461,191
----------- ----------

Long-Term Debt, net of current portion above:
Stockholders and others -- 2,507,363
Obligations under capital leases 1,594,160 --
----------- ----------

Total Long-Term Debt 1,594,160 2,507,363
----------- ----------

Commitments and Contingencies -- --

Stockholders' Equity:
Preferred stock: no par value,
1,000,000 shares authorized,
none issued or outstanding -- --
Common stock: no par value,
10,000,000 shares authorized,
4,876,740 and 3,436,740 shares
issued and outstanding,
respectively 7,851,060 917,117
Retained earnings 127,049 706,073
----------- ----------

Total Stockholders' Equity 7,978,109 1,623,190
----------- ----------

Total Liabilities and
Stockholders' Equity $10,329,054 $4,591,744
=========== ==========

The accompanying notes are an integral
part of these financial statements.

F-4

GUM TECH INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS

Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited)

<S> <C> <C> <C> <C>
Net sales $2,044,531 $1,732,825 $4,343,590 $1,941,562

Cost of sales 1,069,832 967,760 2,310,643 1,011,956
---------- ---------- ---------- ----------

Gross Profit 974,699 765,065 2,032,947 929,606

Operating expenses 1,624,415 352,198 1,118,510 694,555
Research and development 50,773 12,392 90,348 --
---------- ---------- ---------- ----------

Income (Loss) From Operations (700,489) 400,475 824,089 235,051
---------- ---------- ---------- ----------

Other Income (Expense):
Interest and other income 45,733 26,460 53,212 940
Interest expense (137,611) (25,416) (108,980) (4,402)
---------- ---------- ---------- ----------

Total Other Income (Expense) (91,878) 1,044 (55,768) (3,462)
---------- ---------- ---------- ----------

Income (Loss) Before Provision
For Income Taxes (792,367) 401,519 768,321 231,589

Provision (benefit) for income taxes (213,343) 143,006 270,850 --
---------- ---------- ---------- ----------

Net Income (Loss) $ (579,024) $ 258,513 $ 497,471 $ 231,589
========== ========== ========== ==========

Pro Forma Information:
Historical income (loss) before
provision for income taxes $ (792,367) $ 401,519 $ 768,321 $ 231,589
Pro forma provision (benefit)
for income taxes (213,343) 143,006 270,850 81,000
---------- ---------- ---------- -----------

Pro Forma Net Income (Loss) $ (579,024) $ 258,513 $ 497,471 $ 150,589
========== ========== ========== ==========

Pro Forma Net Income (Loss) Per
Share of Common Stock $ (.15) $ .06 $ .11 $ .03
========== ========== ========== ==========

Weighted Average Number of
Common Shares Outstanding 3,974,103 4,392,658 4,392,658 4,392,658
========== ========== ========== ==========

</TABLE>

The accompanying notes are an integral
part of these financial statements.

F-5

GUM TECH INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Common Stock
----------------------------- Retained
Shares Amount Earnings
------ ------ --------

<S> <C> <C> <C>
Balance at December 31, 1993 2,500,000 $ 29,000 $ 79,462

Cash dividends -- -- (65,000)

Issuance of common stock 516,740 250,000 --

Net income -- -- 231,589
--------- ---------- ---------

Balance at December 31, 1994 3,016,740 279,000 246,051

Cash dividends -- -- (37,449)

Issuance of common stock in
private offering (net of
offering costs of $117,883) 420,000 638,117 --

Net income -- -- 497,471
--------- ---------- ---------

Balance at December 31, 1995 3,436,740 917,117 706,073

Issuance of common stock upon
exercise of stock options
(unaudited) 60,000 120,000 --

Issuance of common stock and
warrants in public offering
(net of offering costs of
$1,466,057) (unaudited) 1,380,000 6,813,943 --

Net income (loss) (unaudited) -- -- (579,024)
--------- ---------- ---------

Balance at June 30, 1996
(unaudited) 4,876,740 $7,851,060 $ 127,049
========= ========== =========
</TABLE>

The accompanying notes are an integral
part of these financial statements.

F-6

GUM TECH INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS

Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net income (loss) $ (579,024) $ 258,513 $ 497,471 $ 231,589
Adjustments to reconcile net
income (loss) to cash (used)
by operating activities:
Depreciation 183,512 4,067 13,077 3,068
Deferred income taxes (215,412) -- -- --
Provision for bad debts -- -- 11,000 15,877
Changes in assets and liabilities:
(Increase) in accounts receivable (287,463) (600,861) (661,302) (65,935)
(Increase) in inventories (561,215) (827,067) (663,928) (179,306)
(Increase) in
prepaid expenses and other (96,725) (6,206) (43,940) (548)
(Increase) in deposits and other (175,245) (57,046) (52,207) (27,665)
Increase (decrease) in accounts
payable and accrued expenses 3,441 246,992 102,235 (74,429)
Increase (decrease) in
customer deposits (36,959) 130,200 36,959 --
----------- ---------- ----------- ----------
Net Cash (Used) By
Operating Activities (1,765,090) (851,408) (760,635) (97,349)
----------- ---------- ----------- ----------

Cash Flows From Investing Activities:
Capital expenditures (614,056) (27,582) (864,322) (14,497)
Increase in notes receivable (150,000) (100,000) (100,000) (102,104)
Receipt of principal on
notes receivable -- 100,000 100,000 --
Deposits on purchase of
equipment and other -- (781,055) (667,623) --
----------- ---------- ---------- ----------
Net Cash (Used) By
Investing Activities (764,056) (808,637) (1,531,945) (116,601)
----------- ---------- ----------- ----------

Cash Flows From Financing
Activities:
Proceeds from borrowing 706,397 1,400,000 2,400,000 50,000
Principal payments on
notes payable (2,485,042) (41,742) (41,742) (9,258)
Issuance of common stock 8,400,000 756,000 756,000 250,000
Cash dividends -- (37,449) (37,449) (65,000)
Offering costs incurred (1,277,807) (184,311) (306,133) --
----------- ---------- ----------- ----------
Net Cash Provided By
Financing Activities 5,343,548 1,892,498 2,770,676 225,742
----------- ---------- ----------- ----------

The accompanying notes are an integral
part of these financial statements.
F-7

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
GUM TECH INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(Continued)

Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Net Increase in Cash
and Cash Equivalents $ 2,814,402 $ 232,453 $ 478,096 $ 11,792

Cash and Cash Equivalents
at Beginning of Period 503,327 25,231 25,231 13,439
----------- ---------- ----------- ----------

Cash and Cash Equivalents
at End of Period $ 3,317,729 $ 257,684 $ 503,327 $ 25,231
=========== ========== =========== =========

Supplemental Disclosure of
Cash Flow Information:
Cash paid during the period for:
Interest $ 244,973 $ 3,191 $ 3,191 $ 2,828
Income taxes 23,165 106,052 246,442 --

Supplemental Disclosure of
Non-cash Investing and
Financial Activities:
Capital lease obligation
incurred for new equipment $ 1,194,544 $ -- $ -- $ --

</TABLE>

The accompanying notes are an integral
part of these financial statements.

F-8

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies Organization
------------------------------------------------------------------------
Gum Tech International, Inc. (the "Company") was incorporated in Utah on
February 4, 1991 to develop, market and distribute specialty chewing gum
products under its own brand names and on a private label basis for other
chewing gum marketers. The Company currently markets chewing gum products
with certain ingredients added to promote weight control, energy endurance,
alleviate some pre-menstrual symptoms and promote oral hygiene and breath
freshness. The Company also markets a chewing gum product which includes
anti-oxidant vitamins.

The Company currently contracts with others for the manufacture of its
chewing gum products but expects to complete the leasehold improvements and
purchase of equipment for its 28,000 square foot leased manufacturing
facility in January 1996. The Company expects to produce most of its
chewing gum products at the new facility. The Company relies substantially
upon two distributors to market its products (Note 9).

Unaudited Interim Financial Statements
--------------------------------------
The financial statements as of June 30, 1996 and for the six months ended
June 30, 1996 and 1995 are unaudited, however, in the opinion of management
of the Company, all adjustments (consisting solely of normal recurring
adjustments) necessary to a fair presentation of the financial statements
for the interim periods have been made.

Amendment to Authorized Common and Preferred Shares and Stock Split
-------------------------------------------------------------------
In March 1995, the Company's stockholders adopted a resolution approving a
five for one stock split of the issued and outstanding common shares. The
Company's Board of Directors also authorized, and the shareholders
approved, an amendment and restatement of the Company's Articles of
Incorporation, to increase the number of authorized shares of common stock
from 1,000,000 to 10,000,000 shares and to authorize the issuance of up to
1,000,000 shares of preferred stock.

In December 1995, the Company approved a two for one stock split of the
issued and outstanding common shares. All share information and per share
data have been retroactively restated for all periods presented to reflect
the stock splits and increase in authorized shares.

Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out pricing method.

F-9

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies (Continued)
-----------------------------------------------------------------------
Property and Equipment
----------------------

Depreciation of the primary asset classifications is calculated based on
the following estimated useful lives using the straight-line method.

Classification Useful Life in Years
-------------- --------------------
Machinery and equipment 5-10
Office furniture and equipment 5
Leasehold improvements 10

Depreciation of property and equipment charged to operations is $13,077 and
$3,068 for the years ended December 31, 1995 and 1994, respectively.

Revenue Recognition
-------------------
The Company recognizes revenue from product sales upon shipment to the
customer.

Income Taxes
------------
Beginning January 1, 1993, the Company was an S corporation under the
provisions of the Internal Revenue Code and, accordingly, no provision was
made for income taxes since all income, deductions, gains, losses and
credits were reported on the tax returns of the stockholders. The S
corporation status of the Company terminated on November 18, 1994 and,
thereafter, the Company became a taxable entity. Effective November 18,
1994, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes."
SFAS No. 109 requires the liability method of accounting for income taxes.
Deferred income taxes result from temporary differences in the recognition
of revenue and expenses for income tax and financial reporting purposes.
These differences are primarily due to depreciation.

Deferred Offering Costs
-----------------------
In connection with the Company's proposed public offering (Note 12), costs
incurred to complete the offering have been deferred and will be offset
against the proceeds of the offering if completed, or charged to expense if
the offering is not completed.

Pro Forma Net Income
--------------------
The statements of operations include certain pro forma information giving
effect to a provision for income taxes as if the Company had been a taxable
entity paying federal and state income taxes for all periods presented at
the rates applicable in each period.

Net Income Per Share of Common Stock
------------------------------------
Net income per share of common stock is based upon the weighted average
number of outstanding shares of common stock and, pursuant to the
Securities and Exchange

F-10

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies (Continued)
-----------------------------------------------------------------------
Net Income Per Share of Common Stock (Continued)
------------------------------------------------
Commission Staff Accounting Bulletins, common shares, options and warrants
issued by the Company at prices below the assumed initial public offering
price during the twelve months immediately preceding the offering date are
included in the calculation as if they were outstanding for all periods
presented.

Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be
cash equivalents.

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

2. Inventories
-----------
Inventories at December 31, 1995 consist of the following:

Raw materials and packaging $772,336
Finished goods 126,329
--------
Total $898,665
========

3. Long-Term Debt
--------------

Long-term debt consists of the following:

Stockholders
------------
8% notes due on the earlier of February
1997 or the closing date of any IPO of
the Company's securities, collateralized
by accounts receivable, inventory and
equipment. The notes are subordinated to
the Company's equipment lease. $ 504,000

8% notes due on the earlier of June 1997
or the closing date of any IPO of the
Company's securities, collateralized by
accounts receivable, inventory and
equipment. The notes are subordinated to
the Company's equipment lease. 346,000

F-11

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

3. Long Term Debt (Continued)
--------------------------

Stockholders (Continued)
------------------------
8% unsecured notes due on the earlier of
July 1997 or the closing date of any IPO
of the Company's securities. $1,300,000

Individual
----------
8% unsecured note due on the earlier of
July 1997 or the closing date of any IPO
of the Company's securities. 250,000

Accrued interest due at maturity of
long-term notes payable. 107,363
----------
Total Long-Term Debt $2,507,363
==========

Installments due on debt principal at December 31, 1995 are as follows:

Year Ending December 31, 1997 $2,507,363
----------------------------- ==========

4. Income Taxes

As described in Note 1, no provision was made for income taxes in 1994
since the Company was an S corporation. The S corporation status of the
Company terminated on November 18, 1994. The provision for income taxes for
the year ended December 31, 1995 is as follows:

Current Deferred Total
------- -------- -----
Federal $234,440 $ -- $234,440
State 36,410 -- 36,410
-------- -------- --------

Total $270,850 $ -- $270,850
======== ======== ========

The following is a reconciliation of the provision for income taxes to
income before provision for income taxes computed at the federal statutory
rate of 34% for the year ended December 31, 1995.

Income taxes at the federal statutory rate $261,229
State income taxes, net of federal taxes 25,355
Net operating loss carryover (12,372)
Nondeductible expenses 4,157
Other (7,519)
--------

Total $270,850
========

5. Employee Benefit Plan
---------------------

The Company adopted a simplified Employee Pension Plan in 1992 for its
employees. Employee contributions are discretionary and the Company matches
the employees contributions up to 3% of the employees salary. The

F-12

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

5. Employee Benefit Plan (Continued)
--------------------------------
Company's contributions are fully vested when they are made. The Company
made contributions of $-- and $1,955 for the years ended December 31, 1995
and 1994, respectively. The Company terminated the Plan in 1995.

6. Stock Options and Warrants
--------------------------
Stock Option Plan
------------------
In March 1995, the Company adopted a stock option plan (the "Plan") which
provides for the grant of both incentive Stock Options and Non-qualified
Options. A total of 1,200,000 shares of common stock have been reserved for
issuance under the Plan. Incentive stock options are issuable only to
eligible officers, directors, key employees and consultants of the Company.
The Plan is administered by a committee selected by the Board of Directors,
which determines those individuals who shall receive options, the time
period during which the options may be exercised, the number of shares of
common stock that may be purchased under each option, and the option price.
Unless sooner terminated, the Plan shall remain in effect for a period of
three years from the date of the Plan's adoption.

The per share exercise price of the common stock may not be less than the
fair market value of the common stock on the date the option is granted.
The aggregate fair market value (determined as of the date the option is
granted) of the common stock that any employee may purchase in any calendar
year pursuant to the exercise of incentive stock options may not exceed
$100,000. No person who owns, directly or indirectly, at the time of the
granting of an incentive stock option to him, more than 10% of the total
combined voting power of all classes of stock of the Company shall be
eligible to receive any incentive stock options under the Plan unless the
option price is at least 110% of the fair market value of the common stock
subject to the option, determined on the date of grant.

The exercise date of an option granted under the Plan cannot be later than
three years from the date of grant. All options granted under the Plan
provide for the payment of the exercise price in cash or, with the prior
written consent of the Company, by delivery to the Company of shares of
common stock already owned by the optionee having a fair market value equal
to the exercise price of the options being exercised, or by a combination
of such methods of payment.

The following table contains information on the stock options under the
Company's Plan for the year ended December 31, 1995. The outstanding
agreements expire from March 1998 to August 1998.

F-13

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

6. Stock Options and Warrants (Continued)
-------------------------------------
Stock Option Plan (Continued)
----------------------------
Number of Option Price
Shares Per Share
------ ---------
Options outstanding at
January 1, 1995 -- --
Granted 750,000 $1.50 to $2.00
Exercised -- --
Cancelled -- --
------- --------------

Options outstanding at
December 31, 1995 750,000 $1.50 to $2.00
======= ==============

Non-qualified Stock Options
---------------------------

The Company has granted non-qualified stock options to consultants,
distributors and other individuals. The outstanding agreements expire from
April 1998 to October 1998. The following table contains information on all
of the stock options, except those granted under the Company's stock option
plan, for the year ended December 31, 1995.

Number of Option Price
Shares Per Share
------ ---------
Options outstanding at
January 1, 1995 -- --
Granted 500,000 $1.80 to $6.00
Exercised -- --
Cancelled -- --
------- --------------

Options outstanding at
December 31, 1995 500,000 $1.80 to $6.00
======= ==============

Warrants
--------

In 1995, the Company borrowed $1,550,000 from a group of four lenders
("1995 Bridge Loan"). As additional consideration for the 1995 Bridge Loan,
the Company issued an aggregate of 465,000 common stock purchase warrants
to the lenders.The warrants were issued at exercise prices in excess of the
fair market value of the common stock at the date they were issued and,
therefore, the Company determined that they had a fair value of zero and
the Company assigned the entire proceeds for the 1995 Bridge Loan to the
notes payable. Each warrant is exercisable to purchase one share of the
Company's common stock at $2.00 per share in perpetuity. All 465,000 of the
warrants are outstanding at December 31, 1995.

7. Preferred Stock
---------------
The authorized preferred stock of the Company consists of 1,000,000 shares,
no par value. The preferred stock may be issued in series from time to time
with such designation, rights, preferences and limitations as the Board of
Directors of the Company may determine by resolution. The rights,
preferences and limitations of separate series of preferred stock may
differ with respect to such matters as may be determined by the Board of

F-14

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

7. Preferred Stock (Continued)
--------------------------
Directors, including without limitation, the rate of dividends, method and
nature of payment of dividends, terms of redemption, amounts payable on
liquidation, sinking fund provisions (if any), conversion rights (if any),
and voting rights. Unless the nature of a particular transaction and
applicable statutes require approval, the Board of Directors has the
authority to issue these shares without shareholder approval.

8. Commitments and Contingencies
-----------------------------
Leases
------
The Company leases its office facilities, manufacturing and warehouse
facilities and certain equipment under long-term leasing arrangements. The
Company's manufacturing and warehouse facilities lease contains two three
year renewal options. In addition, the Company's executive offices contains
a two year renewal option. The following is a schedule of future minimum
lease payments at December 31, 1995 under the Company's operating leases
that have initial or remaining noncancellable lease terms in excess of one
year:
<TABLE>
<CAPTION>

Year Ending
December 31, Facilities Equipment Total
------------ ---------- --------- -----
<S> <C> <C> <C> <C>
1996 $ 147,350 $ 921 $ 148,271
1997 156,109 767 156,876
1998 163,832 -- 163,832
1999 125,915 -- 125,915
2000 131,976 -- 131,976
Thereafter 688,507 -- 688,507
---------- ------ ----------

Total Future Minimum
Lease Payments $1,413,689 $1,688 $1,415,377
========== ====== ==========
</TABLE>

Rental expense charged to operations was $53,362 and $42,295 for the years
ended December 31, 1995 and 1994, respectively.

In December 1995, the Company entered into a six year equipment lease
agreement to finance the purchase of its equipment at an interest rate of
approximately 9.5%. The lease is collateralized by all of the Company's
equipment. The lease was funded in January 1996 and the equipment acquired
will be added to the master lease agreement in January and February 1996.

Employment Agreements
---------------------
On March 24, 1995, the Company entered into an employment agreement (the
"Employment Agreement") employing Mr. Ratcliff as the Company's Chief
Executive Officer based upon a salary of $5,000 per month together with a
bonus equal to 7.5% of the Company's pre-tax annual net operating income in
excess of $400,000. The Employment Agreement also provides for the issuance
to Mr. Ratcliff of stock options to

F-15

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

8. Commitments and Contingencies (Continued)
----------------------------------------
Employment Agreements (Continued)
--------------------------------
purchase up to 520,000 shares of common stock at $1.50 per share at any
time until March 24, 1998 and the extension of a $100,000 loan to Mr.
Ratcliff at 8% interest due on December 31, 1996.

In January 1996, the Company entered into an employment agreement with Mr.
Bernstein through December 31, 2000 which may be extended until December
31, 2005 at Mr. Bernstein's option if the Company's net sales (as
hereinafter defined) for the calendar year ending December 31, 2000 exceed
$50 million. Under the employment agreement, Mr. Bernstein is to receive a
base salary of $100,000 with subsequent annual base salaries equal to 2% of
the Company's prior year's net sales but in no event may such annual base
salary exceed $500,000. "Net sales" are defined as gross sales from the
sale of all products in the "Target Markets", which in turn are defined as
all markets except (i) the natural food markets, (ii) private label markets
or (iii) markets developed from direct response television infomercial
advertising. In addition, Mr. Bernstein is entitled to an annual bonus
equal to (i) 5% of the first $5 million of net sales in excess of the prior
year's net sales, (ii) 4% of the next $5 million of net sales in excess of
the prior year's net sales, (iii) 3% of the next $5 million of net sales in
excess of the prior year's net sales and (iv) 2% of all net sales in excess
of $20 million of net sales in the prior year.

Purchase of Manufacturing Equipment
-----------------------------------
The Company will commence manufacturing its own chewing gum products in
1996. In connection therewith, the Company has entered into various
agreements for the purchase of equipment. As of December 31, 1995, the
Company has remaining commitments for the purchase of approximately
$1,550,000 of equipment which has not been received, and has paid
approximately $650,000 leaving a remaining commitment of approximately
$900,000 which will be covered under the Company's master lease agreement
discussed above.

9. Related Party Transactions
--------------------------
On November 18, 1994, Gregory Gossett, the Company's founder, President and
majority stockholder, sold 1,550,000 shares of his common stock in the
Company to Dale Holdings, Inc., LDC ("Dale") for $750,000, or $.48 per
share. On the same date, the Company sold an additional 516,740 shares to
Dale for $250,000, or $.48 per share.

In February 1995, Dale sold an aggregate of 367,150 shares of common stock
of the Company held by it to a group of eleven investors for $560,000, or
$1.53 per share. After paying commissions of $56,000, Dale loaned the
remaining $504,000 to the Company, evidenced by a promissory note (Note 3).
In May 1995 the Company and Dale each sold

F-16

<PAGE>
GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

9. Related Party Transactions (Continued)
-------------------------------------
420,000 shares of the Company's common stock through an Underwriter at
$1.80 per share and paid a commission of 10% of the gross proceeds of the
common stock. Dale loaned the Company $346,000 from the proceeds of the
common stock sold by it, which is evidenced by a promissory note (Note 3).
Both loans from Dale are collateralized by all of the Company's accounts
receivable, inventory and equipment. The notes were distributed to Dale's
two partners in December 1995 and the notes were subordinated to the
Company's equipment lease (Note 8).

On March 24, 1995, the Company entered into an employment agreement with
Richard Ratcliff, its Chief Executive Officer, which provides for a salary,
bonus, stock options and loan to Mr. Ratcliff. In March 1996, the
employment agreement was amended to delete the bonus provision (Note 8). As
of December 31, 1995, the Company has a note receivable from Mr. Ratcliff
of $100,000 (Note 8).

The Company has entered into exclusive U.S. and foreign distribution
agreements (the "Distribution Agreements") with Bernstein Bros. Marketing
Incorporated (doing business as National Distributing) ("National").
National holds exclusive rights to market the Company's ChromaTrim gum to
retailers within the United States, except retailers in the natural food
industry, the private label market or directly to customers ("direct
response") through media advertisements and infomercials broadcast on cable
television networks. United Merchants, Inc. ("UMI") holds rights to market
the same products on a direct response basis within the United States and
both on a direct response basis and to retail accounts outside the United
States. National and UMI (collectively the "Distributors") also have the
first right of refusal to market any new diet chewing gums developed by the
Company under the same terms and conditions as the ChromaTrim agreements.
Richard Bernstein, a director of the Company, is an executive officer and
director of National and a principal stockholder of UMI. The Distribution
Agreements, which primarily relate to the Company's ChromaTrim chewing gum,
represented 69.5% and 66.9% of the Company's total sales for the years
ended December 31, 1995 and 1994, respectively. Although minimum sales
requirements are required under the Distribution Agreements, should the
Distributors fail to meet such minimum sales requirements or should the
Distributors otherwise breach the Distribution Agreements for any reason,
the Company's operations would be substantially and adversely affected. To
date, the Distributors have failed to meet the minimum sales requirements.
Trade accounts receivable from National and UMI were $775,130 and $681,428
at December 31, 1995 and 1994, respectively. Payments are generally due
within 30 days of the invoice date.

F-17

<PAGE>

GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

9. Related Party Transactions (Continued)
-------------------------------------
In January 1996, the Company, National and UMI cancelled their exclusive
U.S., and foreign Distribution Agreements. The Company entered into a two
year agreement with National pursuant to which the Company agreed to sell
National, on a non-exclusive basis, ChromaTrim and CitrusSlim chewing gum
for sale by National solely to non-chain convenience stores, grocery
stores, drugstores and other similar retail food stores. The Company
entered into a two year agreement with UMI pursuant to which the Company
agreed to sell to UMI on a non-exclusive basis ChromaTrim and CitrusSlim
chewing gum for sale by UMI solely in the United States through direct
response television infomercial advertising.

The Company loaned $100,000 to National at 8% interest in December 1994
which was evidenced by a promissory note due in 1995. The $100,000
principal and $3,000 interest was repaid to the Company in March 1995.

In January 1996, Mr. Manhold, a director and previous President of the
Company, exercised options to purchase 60,000 shares of the Company's
common stock at $2.00 per share and sold such shares to Mr. Epert, the
Company's Chairman and President, for $2.00 per share.

In January 1996, the Company loaned $150,000 to Mr. Epert under a
promissory note with interest at 8% per annum, due in January 1998.

10. Concentration of Credit Risk and Major Customers
------------------------------------------------
The Company's accounts receivable are due from customers located throughout
the United States and various foreign countries. The Company performs
periodic credit evaluations of its customers' financial condition and
generally requires no collateral. The Company maintains reserves for
potential credit losses, and such losses have not exceeded management's
expectations.

Sales to major customers, as a percentage of net sales, for the years ended
December 31, 1995 and 1994 were as follows:

1995 1994
---- ----

Customer A 42.8% 62.4%
Customer B 26.7%

11. Private Offering of Common Stock
--------------------------------
In January 1996, the Company sold 619,175 shares of its common stock at
$5.00 per share through an Underwriter. The Company paid a sales commission
of 10% of the gross proceeds of the common stock sold. All of the net
proceeds of the offering ($2,786,288) were used to repurchase from Brett
Bouchy, a principal stockholder of the Company, and retire, 619,175 shares
of the Company's common stock held by Mr. Bouchy at a repurchase price of
$4.50 per share. Other

F-18

<PAGE>
GUM TECH INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS

11. Private Offering of Common Stock (Continued)
------------------------------------------------
expenses of the offering, including legal fees, accounting fees, printing
and other expenses will be paid by Mr.Bouchy.

12. Proposed Public Stock Offering
------------------------------
The Company has executed a letter of intent with an Underwriter to offer
400,000 units of the Company's securities, each unit consisting of three
shares of the Company's common stock and one redeemable common stock
purchase warrant to the public at $18.00 per unit. Each warrant is
exercisable to purchase one share of common stock at $7.50 per share for a
period of five years from the effective date of the Company's Registration
Statement and may be redeemed by the Company after six months for $.01 per
warrant if the closing price of the common stock on the NASDAQ National
Market System is at least $9.00 per share for 20 consecutive trading days.
The Company will also grant the Underwriter an option to purchase an
additional 60,000 units from the Company to cover over-allotments for a
period of thirty days from the effective date of the Registration
Statement.

The Company will pay the Underwriter a commission equal to ten percent of
the gross proceeds of the offering and a non-accountable expense allowance
equal to three percent of the gross proceeds of the offering. In connection
with the offering, the Company has agreed to issue the Underwriter a
warrant, for $100, to purchase up to 40,000 units for $24.75 per unit. The
Underwriter's warrant is exercisable for a period of four years beginning
one year from the effective date of the Registration Statement. The units
subject to the Underwriter's warrant will be identical to the units sold to
the public. There can be no assurance that the offering will be
successfully completed.

13. Subsequent Events (Unaudited)
----------------------------
Public Stock Offering
---------------------
The public stock offering was completed and the closing occurred on April
30, 1996. In May 1996 the Underwriter exercised its over-allotment option
for 60,000 additional units.

Stock Option Plan
-----------------
In May 1996, the Company amended its stock option plan to increase the
number of options available under the Plan to 1,500,000. In addition, the
Company filed a Registration Statement to register all shares issuable
under the Plan.

F-19

<PAGE>

========================================== =================================

No dealer, salesman or other person
has been authorized to give any
information or to make any representations
other than contained in this Prospectus in
connection with the Offering described 2,874,715 SHARES OF
herein, and if given or made, such COMMON STOCK
information or representations must not be
relied upon as having been authorized by
the Company. This Prospectus does not
constitute an offer to sell, or the
solicitation of an offer to buy, the
securities offered hereby to any person in
any state or other jurisdiction in which
such offer or solicitation is unlawful.
Neither the delivery of this Prospectus GUM TECH INTERNATIONAL, INC.
nor any sale hereunder shall, under any
circumstances, create any implication that
there has been no change in the affairs of
the Company since the date hereof.

---------------

TABLE OF CONTENTS

Page
Available Information.................. 2
Prospectus Summary..................... 3
Risk Factors........................... 7
Capitalization......................... 13
Price Range of Common Stock............ 13 ---------------
Use of Proceeds........................ 13
Selected Financial Data................ 14 PROSPECTUS
Management's Discussion and
Analysis of Financial Condition ---------------
and Results of Operations............ 15
Business............................... 20
Management............................. 28
Principal Stockholders................. 37
Selling Stockholders................... 38
Certain Transactions................... 47
Description of Securities.............. 51
Legal Matters.......................... 54
Experts................................ 54
Financial Statements...................F-1

Until __________, 1996 (25 days after
the date of this Prospectus), all dealers
effecting transactions in the registered
securities, whether or not participating
in this distribution, may be required to .........., 1996
deliver a Prospectus. This is in addition
to the obligation of dealers to deliver a
Prospectus when acting as underwriters and
with respect to their unsold allotments or
subscriptions.

========================================== =================================

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. Indemnification of Directors and Officers.

Article 5 of the Company's Bylaws provides as follows:

"ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES

5.1 Indemnification of Directors and Officers. The corporation shall
indemnify any individual made a party to a proceeding because the individual is
or was a director or officer of the corporation, against liability incurred in
the proceeding, but only if such indemnification is both (i) determined
permissible and (ii) authorized, as such are defined in subsection (a) of this
section 5.1. (Such indemnification is further subject to the limitation
specified in subsection 5.1(c).)

5.1.(a) Determination and Authorization. The corporation shall not
indemnify a director or officer under this section unless:

(1) a determination has been made in accordance with the
procedures set forth in section 16-10a-906(2) of the Act that the
director or officer met the standard of conduct set forth in
subsection (b) below; and

(2) payment has been authorized in accordance with the procedures
set forth in section 16-10a-906(4) of the Act based on a conclusion
that the expenses are reasonable, the corporation has the financial
ability to make the payment, and the financial resources of the
corporation should be devoted to this use rather than some other use
by the corporation.

5.1.(b) Standard of Conduct. The individual shall demonstrate that:

(1) his or her conduct was in good faith; and

(2) he or she reasonably believed that his or her conduct was in,
or not opposed to, the corporation's best interests; and

(3) in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful.

5.1.(c) No Indemnification in Certain Circumstances. The corporation
shall not indemnify a director or officer under this Section 5.1 of Article 5:

<PAGE>

(1) in connection with a proceeding by or in the right of the
corporation in which the director or officer was adjudged liable to
the corporation; or

(2) in connection with any other proceeding charging that the
director or officer derived an improper personal benefit, whether or
not involving action in his or her official capacity, in which
proceeding he or she was adjudged liable on the basis that he or she
derived an improper personal benefit.

5.1.(d) Indemnification in Derivative Actions Limited. Indemnification
permitted under this section 5.1 in connection with a proceeding by or in the
right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding.

5.2. Advance of Expenses for Directors and Officers. If a determination is
made, following the procedures of section 16-10a-906(2) of the Act, that the
director or officer has met the following requirements and if an authorization
of payment is made following the procedures and standards set forth in section
16-10a-906(4) of the Act, then the corporation shall pay for or reimburse the
reasonable expenses incurred by a director or officer who is a party to a
proceeding in advance of final disposition of the proceeding, if:

5.2.(a) the director or officer furnishes the corporation a written
affirmation of his or her good faith belief that he or she has met the standard
of conduct described in section 5.1;

5.2.(b) the director or officer furnishes the corporation a written
undertaking, executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the standard of
conduct; and

5.2.(c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under section 5.1 of
these bylaws or Part 9 of the Act.

5.3. Indemnification of Agents and Employees Who Are Not Directors or
Officers. The board of directors may indemnify and advance expenses to any
employee or agent of the corporation who is not a director or officer of the
corporation to any extent consistent with public policy, as determined by the
general or specific actions of the board of directors.

5.4. Insurance. By action of the board of directors, notwithstanding any
interest of the directors in such action, the corporation may purchase and
maintain liability insurance on behalf of a person who is or was a director,
officer, employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Act."

II-2

<PAGE>

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, Washington, D.C. 20549, such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the officer, director or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such officer, director or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the final
adjudication of such issue.

ITEM 25. Other Expenses of Issuance and Distribution.(1)

SEC Registration Fee.......................... $ 5,227
NASD Filing Fee............................... 0
Blue Sky Legal and Filing Fees................ 4,000
Printing Expenses............................. 5,000
Legal Fees and Expenses....................... 10,000
Accounting Fees............................... 7,500
Miscellaneous Expenses........................ 18,273
-------

TOTAL......................................... $50,000 (1)

(1) All expenses, except the SEC registration fee and NASD filing fee, are
estimated.

ITEM 26. Recent Sales of Unregistered Securities

During the last three years, the Registrant sold the following shares of
its Common Stock which were not registered under the Securities Act of 1933, as
amended.

(i) In November 1994, the Registrant sold 516,740 shares to Dale Holdings, LDC
for $250,000 or $.48 per share.

II-3

<PAGE>

(ii) In May 1995, the Registrant sold 420,000 shares of its Common Stock to the
individuals named below at $1.80 per share. Kensington Securities, Inc. acted as
the Selling Agent for the securities earning a sales commission of $75,600 based
upon gross proceeds from the sale of the securities by the Registrant of
$756,000. (Kensington earned an additional sales commission of $75,600 by
selling $756,000 of securities held by Dale Holdings, Inc. (a principal
stockholder of the Registrant) at the same price per share. See "Underwriting.")

Name Number of Shares
---- ----------------

Earl and Ruth A. Miller 60,000
James and Abby Swanson 56,000
Craig Babcock 40,000
John J. You 30,000
Daniel T. Nordstrom 22,200
Traxlein Partners 11,800
Terry D'Arcy 40,000
Michael R. Nordstrom 19,400
J. Kley Partners 30,000
George Knostman 14,000
Lawrence and Cynthia J. Davis 18,000
Lawrence R. Schroeder 14,000
Gary Rudy IRA 28,000
Josephine Tinimbang 14,400
Gerald Laughlin and Charlie Clatterbuck 22,200
-------

Total 420,000

(iii) In October 1995, the Registrant issued an aggregate of 465,000 common
stock purchase warrants to the following four individuals in the amounts
following their names: Brett Bouchy (165,000 Warrants), Robert H. Wood (75,000
Warrants), Karl B. Berger (150,000 Warrants) and John W. Frasco (75,000
Warrants) and as additional compensation for loaning the Registrant an aggregate
of $1,550,000. The warrants are exercisable at $2.00 per share in perpetuity.
The loans bear interest at 8% per annum, are due the earlier of July 1997 or the
closing date of the Offering and were advanced by the four individuals in the
following amounts: Brett Bouchy - $550,000; Robert H. Wood - $250,000; Karl B.
Berger - $500,000; John W. Frasco - $250,000.

(iv) In April and October 1995, the Registrant issued 40,000 and 100,000 stock
options respectively to Meris Financial Incorporated ("Meris") for consulting
services rendered to the Company. The options were exercisable at $6.00 per
share with the 40,000 options exercisable until April 1998 and the 100,000
options exercisable until October 1998. In March 1996 Meris cancelled the
options. See "Description of Securities - Common Stock."

(v) In April 1995, the Registrant issued 108,000 stock options to Richard
Bernstein, 72,000 stock options to Bernard Bernstein, 54,000 stock options to
Chaim Bess and 126,000 stock

II-4

<PAGE>

options to Steven Oscherowitz all for consulting services rendered to the
Company exercisable at $1.80 per share until April 1998.

(vi) In January 1996 the Registrant sold 619,175 shares of its Common Stock at
$5.00 per share to the individuals named below. Kensington Securities, Inc.
acted as the Selling Agent for the securities earning a sales commission of
$309,587 based upon gross proceeds from the sale of the securities by the
Registrant of $3,095,875. These shares were subsequently registered with the
Commission pursuant to a Registration Statement on Form SB-2 file number 333-870
declared effective by the Commission on April 24, 1996.

Name and Address Number of Shares
---------------- ----------------

Craig Babcock 15,000
1904 Midwest Club Parkway
Oak Brook, IL 60521

Clyde and Anne Balch 5,000
645 Galleon Drive
Naples, FL 33940

James M. Barry 5,000
175 W. Jackson
Chicago, IL 60604

Karl Berger 40,000
97 Patterson Road
Joliet, IL 60434

Doyle Boatwright 5,000
2029 E. Montebello
Phoenix, AZ 85016

William and Robin Boone 15,000
4639 E. Gelding Drive
Phoenix, AZ 85032

Lynn and John Brayton 6,000
835 Margret Street
Des Plaines, IL 60016

Robert Brumbaugh 10,000
546 W. Campus Drive
Arlington Heights, IL 60004

II-5

<PAGE>

Name and Address Number of Shares
---------------- ----------------

Dan Chiapetta 5,000
740 W. Melrose Street
Chicago, IL 60657

C. C. Management 5,000
c/o Charles and Linda Clatterbuck
1008 Marian Avenue
Bellevue, NE 68005

Consolidated Tax Services, Inc. 5,000
c/o Richard J. LaGrant
125 Millis Lane
Schaumburg, IL 60193

Lynn Crabtree 10,000
3023 Timberlane Drive
Fort Madison, IA 52627

Ernest P. and Kathleen L. Dallafior 5,000
614 N. Harvey Avenue
Oak Park, IL 60302

Terry D'Arcy 12,500
304 James Street
Plainfield, IL 60544

William L. Davis 10,375
115 Danvers Farm Circle
Union, OH 45322

Michael F. and Jana K. Day 13,800
253 Farr Avenue
Wadsworth, OH 44281

Michael and MaryAnn DiDomenico 5,000
5215 N. Marmora
Chicago, IL 60630

Barry Donner 6,000
23781 Hobart Bay
Dana Point, CA 92629

II-6

<PAGE>

Name and Address Number of Shares
---------------- ----------------

David A. Dysard 5,000
201 Thurman Avenue
Michigan City, IN 46360

Henry A. and Wanda F. Dziopek 5,000
5026 W. Newland Avenue
Chicago, IL 60656

Financial Freedom Fund 25,000
c/o Walter B. Russell
519 N. James Street
Flagstaff, AZ 86001

Peter Fischer 5,000
392 Roan Street
San Jose, CA 95123

Gerald F. Freund 5,000
227 Town Acres Lane
Roselle, IL 60172

R. Scott Green 5,000
6243 E. Sunnyside Drive
Scottsdale, AZ 85254

John Matthew Hamilton 10,000
311 Patricia Drive
Georgetown, TX 78628

Haskes Revocable Family Trust 6,000
2323 N. Central Avenue #504
Phoenix, AZ 85004

Don Hawkins Jr. and Mary Elizabeth Giddens 5,000
6402 Clairmont Drive
Austin, TX 78749

John P. Hess 5,000
12428 N. Emily Lane
Mequon, WI 53092

II-7

<PAGE>

Name and Address Number of Shares
---------------- ----------------

James R. Howland 3,000
19262 Jasper Hill Road
Trabuco Canyon, CA 92679

Irmgard Drilling 5,000
c/o Annette G. Bouska
4901 Galway Drive
Dublin, OH 43017

Gary R. Italia 2,500
950 Tarpon Center Drive, Unit 504
Venice, FL

John K. Jensen 5,000
7272 East Gainey Ranch #118
Scottsdale, AZ 85258

John Epert Family Trust 10,000
215 W. Northview
Phoenix, AZ 85021

Stuart Krasnow 5,000
4321 W. Foster
Skokie, IL 60076

Robert and Regina LaMotte 5,000
25515 Blondo Street
Waterloo, NE 68069

Christopher J. Lang 10,000
923 Hidden Hill Lane
Palatine, IL 60067

Helene D. Lilly 5,000
9048 N. 14th Drive
Phoenix, AZ 85021

Ruth & David Macklin 5,000
3815 Kiess
Glenview, IL 60025

II-8

<PAGE>

Name and Address Number of Shares
---------------- ----------------

Megavest Financial Group, Inc. 30,000
c/o George A. York
8020 N. 13th Street
Phoenix, AZ 85020

Ronald and Trudy Orzechowski 6,000
2007 Mark Terrace
Mt. Prospect, IL 60056

Gary D. Oswald 15,000
2888 Spruce Court
Geneva, IL 60134

Peter J. Pluth 12,500
17050 McLanna Drive
Plainfield, IL 60544

Paul Powers and Marcia Weinkoff 20,000
150 Cobey Road
Rocky Hill, CT

RAHM 25,000
c/o Ruth Miller and William A. Traxel
4909 Forrest Grove
Lovespark, IL 61111

Dennis T. Reed 14,000
22810 Capehart Road
Gretna, NE 68028

Lyle P. Reigel 10,000
2515 W. Prospect Avenue
Appleton, WI 54915

Gary A. Richter 5,000
1231 Channahon Road
Joliet, IL 60436

Gary Rudy 10,000
1004 LaCrosse Street
LaCrosse, WI 54601

II-9

<PAGE>

Name and Address Number of Shares
---------------- ----------------

William Rudy 5,000
722 Ash Court
Verona, WI 53593

Nick and Brigitte Sasso 5,000
1711 Galloway Drive
Barrington, IL 60010

Thomas Shuhda 5,200
672 S. Wynne, Apt. 25
Colville, WA 99114

Alice J. Slanec Trust 10,000
c/o Alice J. Slanec
21148 N. 18th Street
Barrington, IL 60010

Douglas A. Smith 5,000
604 Meas Court
Waukesha, WI 53188

Melissa J. Smith 5,000
4608 E. Bernell Drive
Phoenix, AZ 85028

Abby Swanson 7,100
809 Zaininger Avenue
Naperville, IL 60563

Barbara A. Swanson 6,000
c/o James A. Swanson, Custodian Under UGMA
809 Zaininger Avenue
Naperville, Ill 60563

David J. Swanson 6,000
c/o James G. and Abby L. Swanson
809 Zaininger Avenue
Naperville, IL 60563

II-10

<PAGE>

Name and Address Number of Shares
---------------- ----------------

James Swanson 7,100
809 Zaininger Avenue
Naperville, IL 60563

James and Abby Swanson 8,100
809 Zaininger Avenue
Naperville, IL 60563

Kim W. Swartz 10,000
P.O. Box 22910
Lincoln, NE 68542-2910

James S. Tiernan 5,000
1332 Dartmouth Road
Flossmoor, IL 60422

Josephine C-H Tinimbang 5,000
4851 W. Greenleaf
Lincolnwood, IL 60646

Vince Villanucci 5,000
923 Allison
Lorain, OH 44052

David H. Welch 25,000
5917 N. Isabell
Peoria, IL 61614

John Whalen & Martin Oliveira 6,000
2431 Alamo Glen Drive
Danville, CA 94526

Robert H. Wood 15,000
930 Cape Marco Tampico, #505
Marco Island, FL 33937

Scott J. Wooley 6,000
995 W. Glenn
Elk Grove, IL 60007

II-11

<PAGE>

Name and Address Number of Shares
---------------- ----------------

John J. You 15,000
5550 N. Kenmore
Chicago, IL 60640

(vii) From time to time, the Registrant has issued stock options (currently
aggregating 760,000 such stock options) to employees, officers and directors
under its 1995 Stock Option Plan.

With respect to the sales made, the Registrant relied on Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"), and/or Regulation D,
Rule 506. No advertising or general solicitation was employed in offering the
securities. The securities were offered to a limited number of individuals and
the transfer thereof was appropriately restricted by the Registrant. All
shareholders were accredited investors as that term is defined under Regulation
D under the 1933 Act and were capable of analyzing the merits and risks of their
investment who acknowledged in writing that they were acquiring the securities
for investment and not with a view toward distribution or resale and understood
the speculative nature of their investment.

ITEM 27. Exhibits.

Exhibit No. Title
----------- -----

1.01 Form of Underwriting Agreement(1)

1.02 Form of Selling Agreement(1)

1.03 Form of Representative's Warrants(1)

1.04 Amended Form of Underwriting Agreement(1)

1.05 Amended Form of Selling Agreement(1)

1.06 Form of Representative's Unit Warrant(1)

1.07 Form of Warrant Agreement(1)

2.01 Certificate of Incorporation and Amendments thereto of the
Registrant(1)

2.02 Bylaws of the Registrant(1)

5.01 Opinion of Gary A. Agron, regarding legality of the Common Stock
(includes Consent)(1)

II-12

<PAGE>

10.01 1995 Stock Option Plan(1)

10.02 Lease Agreement - Phoenix Executive Office Facility(1)

10.03 Employment Contract with Mr. Ratcliff(1)

10.04 Employment Contract with Mr. Manhold(1)

10.05 Employment Contract with Mr. Kehoe(1)

10.06 Employment Contract with Mr. Bouchy(1)

10.07 Form of Bridge Loan Agreement together with Exhibits thereto(1)

10.08 Lease Agreement - Phoenix, Arizona manufacturing facility(1)

10.09 Amendment to Stock Option Plan(1)

10.10 Lease with Textron Financial Corporation(1)

10.11 Memorandum of Understanding with Universal Merchants, Inc.
(U.S.A.)(1)

10.12 Memorandum of Understanding with Bernstein Bros. Marketing
Corporation(1)

10.13 Waiver Under Employment Agreement (Mr. Ratcliff)(1)

10.14 LaLanne License Agreement(1)

10.15 Manufacturing Agreement with Ford Machine Company, Inc.(1)

10.16 Employment Agreement with Mr. Bernstein(1)

10.17 Engagement Agreement (Mayday, Inc.)(1)

10.18 Employment Agreement with Mr. Epert(1)

10.19 Employment Agreement with Mr. Kern(2)

10.20 Revised Employment Agreement with Mr. Ratcliff

10.21 Revised Employment Agreement with Mr. Epert

II-13

<PAGE>

23.01 Consent of Angell & Deering(1)

23.02 Consent of Gary A. Agron (See 5.01, above)(1)

23.03 Consent of Angell & Deering(1)

23.04 Consent of Angell & Deering(1)

23.05 Consent of Angell & Deering(1)

23.06 Consent of Gary A. Agron

23.07 Consent of Angell & Deering

- ----------
(1) Incorporated by reference to the Registrant's Registration Statement
on Form SB-2 declared effective by the Commission on April 24, 1996,
file number 333-870. (2) Incorporated by reference to the Registrant's
Form 8K dated August 26, 1996, Commission File Number 0-27646.

ITEM 28. Undertakings.

The Registrant hereby undertakes:

(a) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and Exchange
Commission such supplementary and periodic information, documents and reports as
may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.

II-14

<PAGE>

(c) That any post-effective amendment filed will comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.

(d) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(e) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(f) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.

(g) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.

II-15

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Phoenix, Arizona, on October 18, 1996.

GUM TECH INTERNATIONAL, INC.

By: /S/ GERALD N. KERN
-------------------------------
Gerald N. Kern
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons on the
dates indicated.

Signature Title Date
--------- ----- ----

/s/ Richard Ratcliff Chairman of the Board of October 18, 1996
- -------------------------
Richard Ratcliff Directors and Senior Vice
President

/s/ Gerald N. Kern Chief Executive Officer, October 18, 1996
Gerald N. Kern President and Director

/s/ John E. Epert Vice Chairman of the Board of October 18, 1996
- -------------------------
John E. Epert Directors and Executive
Vice President

/s/ Gary S. Kehoe Chief Operating Officer and October 18, 1996
- -------------------------
Gary S. Kehoe Director

/s/ Richard Bernstein Vice President of Sales and October 18, 1996
- -------------------------
Richard Bernstein Marketing and Director

/s/ Jeffrey L. Bouchy Secretary, Treasurer, Chief October 18, 1996
Jeffrey L. Bouchy Financial Officer (Principal
Accounting Officer)

/s/ William G. Meris Director October 18, 1996
- -------------------------
William G. Meris

/s/ Gregory W. Gossett Director October 18, 1996
- -------------------------
Gregory W. Gossett

/s/ Woodrow C. Monte Director October 18, 1996
- -------------------------
Woodrow C. Monte

<PAGE>

EXHIBIT INDEX

Exhibit No. Title

10.20 Revised Employment Agreement with Mr. Ratcliff

10.21 Revised Employment Agreement with Mr. Epert

23.06 Consent of Gary A. Agron

23.07 Consent of Angell & Deering

EMPLOYMENT AGREEMENT

EFFECTIVE DATE: August 14, 1996

EMPLOYMENT DATE: The date on which Gerald Kern can assume on a full time
basis, responsibility for the overall and day-to-day
operations of Employer, but in no event later than September
l, 1996.

TRANSITION PERIOD: Commencing August 14, 1996 and continuing through a
transition period to expire at the discretion of Employer,
but in no event later than December 31, 1996.

EMPLOYER: GUMTECH INTERNATIONAL, INC.
a Utah corporation

EMPLOYEE: RICHARD RATCLIFF

PURPOSE:
- -------

Employer is in the business of manufacturing, marketing and selling value
added gum products to wholesalers and distributors and in the retail and private
label markets (collectively, the "Business"). Employer desires to employ
Employee as the Chairman of the Board of Directors of Employer, effective on the
Effective Date, and as the Senior Vice President of Employer, effective on the
Employment Date, and Employee desires to accept such employment, on the terms,
covenants and conditions set forth in this Employment Agreement (this
"Agreement").

AGREEMENTS:
- -----------

For the reasons set forth above, and in consideration of the mutual
promises and agreements set forth in this Agreement, Employer and Employee agree
as follows:

l. Employment Duties.
------------------

l.l Subject to and in accordance with this Agreement, Employer
employs Employee as the Chairman of the Board of Directors of Employer,
effective on the Effective Date, and as the Senior Vice President of Employer,
effective on the Employment Date, and Employee accepts employment with Employer
subject to the general supervision and pursuant to the orders, advice and
direction of Employer. In his capacity as Chairman of the Board, Employee shall,
commencing on the Effective Date, preside at all meetings of the shareholders
and of the Board of Directors and shall assist in long range planning and
policy-making decisions of Employer and shall in general perform such other
duties as shall be designated by the Board of Directors from time to time. In
his capacity as the Senior Vice President, he will generally assist the
President and perform such other duties from time to time agreed upon by
Employer and Employee.

<PAGE>

1.2 Commencing on the Employment Date, Employee shall use his
reasonable efforts in the performance of all the duties that may be required of
and from him pursuant to the express and implicit terms of this Agreement but
shall not be required to devote his full time thereto. Such duties shall be
rendered in Phoenix, Arizona, and at such other places as Employer and Employee
shall mutually agree upon.

1.3 Nothing herein contained shall be construed to create a
partnership or joint venture between Employer and Employee. Neither party hereto
shall be liable for the debts or obligations of the other unless expressly
assumed in writing and signed by the parties hereto.

2. Term. This Agreement shall become effective on the Effective Date and,
unless terminated sooner pursuant to Section 5, continue through December 31,
1997.

3. Compensation and Other Benefits.
-------------------------------

3.1 Compensation. For services rendered to Employer hereunder, in
whatever capacity rendered, Employee shall have and receive, subject to
withholding and other applicable taxes, compensation as follows:

3.1.1 During the Transition Period, a monthly salary of
$5,000 per month, payable monthly commencing on the
Effective Date, in arrears in two equal monthly
installments.

3.1.2 On the expiration of the Transition Period through the
expiration of the term of this Agreement, a monthly
salary of $2,000 per month, payable monthly, in arrears
in two equal monthly installments; provided, however,
that in the event that Employee is required to expend
in excess of 80 hours per month fulfilling his duties
hereunder, then Employer and Employee shall renegotiate
the monthly salary to be commensurate with the duties
hereunder.

3.2 Business Expenses. Upon submission of proper documentation,
Employer shall pay or reimburse Employee for all reasonable and necessary
office, telephone, travel and other expenses incurred by him in the pursuit of
his duties on behalf of Employer.

3.3 Employee Benefits. Employee shall be entitled to participate in
any other bonus, stock option, incentive compensation, deferred compensation,
group medical and dental insurance plans or other plans or programs and to
receive any other benefits for which he is eligible and which Employer may
provide its employees generally or its officers specifically.

4. Facilities. Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, offices, secretarial help, and other
services and supplies as it deems necessary for Employee's performance of his
duties under this Agreement, as established from time to time by Employer.

-2-

<PAGE>

5. Termination.
------------

5.1 This Agreement and Employee's employment hereunder may be
terminated at any time:

(a) Upon mutual agreement in writing.

(b) By Employee upon the material breach by Employer of any
of the material provisions of this Agreement.

(c) By Employer for Cause. For purposes of this Agreement,
the term "Cause" shall mean: (i) conduct on the part of
Employee which is intended to result directly or
indirectly in substantial gain or personal enrichment
at the expense of Employer; (ii) the material breach by
Employee of any of the provisions of this Agreement: or
(iii) the failure by Employee to substantially perform
his duties hereunder.

Further, this Agreement and Employee's employment hereunder shall automatically
terminate upon the death, disability or insanity of Employee or the bankruptcy
of Employer or the discontinuance of Employer's Business.

5.2 Notwithstanding the termination of this Agreement or of Employee's
employment hereunder, the parties hereto shall he required to carry out any
provision hereof which contemplate performance by them subsequent to such
termination, nor shall such termination affect any liability or obligation which
has accrued prior to such termination, including but not limited to, accrued but
unpaid compensation and any liability for loss or damage on account of default.

5.3 Following any termination of employment hereunder, or notice
thereof, Employee shall fully cooperate with Employer in all matters relating to
the winding up of his pending work on behalf of Employer and the orderly
transfer of any such pending work to other employees of Employer as may be
designated by Employer. In consideration thereof, Employer shall pay Employee
for any services rendered post-termination at a rate equivalent to the hourly
rate payable to Employee during the Initial Term or the Extension Term, as
applicable, during which the termination occurred.

5.4 Upon termination of this Agreement, or whenever requested by
Employee, Employee shall immediately turn over to Employer all of Employer's
property, including all items used by Employee in rendering services hereunder,
that may be in Employee's possession or under his control.

-3-

<PAGE>

6. Covenant Not to Compete: Disclosure of Information.
---------------------------------------------------

6.1 Solicitation.
------------

6.1.1 For a period of six months after the date of
termination of this Agreement, Employee shall not,
whether alone or as a partner, officer, director,
employee or shareholder (or other holder of an equity
interest) of, or consultant, advisor or lender to, any
other corporation, partnership or other entity, or as a
trustee, fiduciary or other representative, solicit
Employer's customers with respect to, engage in or have
any interest, including, as a creditor, in any person,
partnership, corporation, association,or other business
entity, whether as employee, officer, director, agent,
consultant, stockholder or holder of any right to any
form of equity ownership, or otherwise, that engages in
the Business.

6.1.2 Employee shall not, during, or for a period of six (6)
months after the term of this Agreement, solicit any
employee, sales representative or independent
contractor of Employer for employment by any person,
firm, partnership, corporation, association or other
entity for any reason or purpose allied or related to
the Business whatsoever.

6.2 Non Disclosure.
---------------

6.2.1 Employee hereby recognizes and acknowledges that: (i)
Employee will be making use of, acquiring, and/or
adding to proprietary information of a special and
unique nature and value relating to and including but
not limited to, such matters Employer's trade secrets,
systems, procedures, manuals, confidential reports.
lists of suppliers, research and development projects,
policies, processes, formulas, techniques, know-how and
facts relating to sales, advertising, mailing,
promotions, financial matters, customers, customer
lists, purchases or requirements or other methods used
and preferred by Employer in its operations, (ii) the
Company will disclose certain proprietary information
to Obligator including, but not limited to, the
details of any statistical or financial data, the
operations and structure of the business of Employer,
and manuals, forms, techniques, methods or procedures
of Employer used by or made available to Employee in
the course of Employee's employment (the information
referenced to in paragraphs 6.2.1 (i) and (ii) above
are hereinafter collectively referred to as the
"Proprietary Information").

-4-

<PAGE>

6.2.2 Employee hereby recognizes and acknowledges that the
Proprietary Information is a valuable, special and
unique asset of Employer's business.

6.2.3 Employee will not at any time directly or indirectly
make use of, divulge or disclose any,of the Proprietary
Information or any part thereof for any purpose
whatsoever to any person, firm, corporation,
association or other entity for any reason or purpose
whatsoever that has been obtained by, or disclosed to,
him as a result of his relationship with Employer.
Immediately upon request by Employer, Employee shall
return to Employer any and all materials relating to
Proprietary Information.

6.3 Acknowledgement.
---------------
6.3.1 Employee acknowledges that the covenants contained in
this Section 6 are a material inducement for Employer
to enter into this Agreement and to perform its
obligations hereunder and that the services Employer is
to render to Employer hereunder are of a special and
unusual character with a unique value to Employer.
Employee acknowledges that it would take at least six
(6) months for Employer to retain and train personnel
to replace Employee. Accordingly, Employee acknowledges
that the restrictions contained in this Section 6 are
reasonably necessary for the protection of Employer's
business and that a breach of any such restrictions
could not adequately be compensated by damages in an
action at law.

6.3.2 In the event of a breach or threatened breach by
Employee of any provision contained in this Section 6,
Employer shall be entitled to obtain, by posting an
appropriate bond, an injunction (preliminary or
permanent, or a temporary restraining order)restraining
Employee from the activity or threatened activity
constituting or that would constitute a breach.

6.3.3 In the event of a breach by Employee of any provision
contained under this Section 6, Employer shall be
entitled to an accounting and repayment of all profits,
compensation, commissions, remunerations or other
benefits that Employee, directly or indirectly, has
realized and/or may realize as a result of, arising out
of or in connection of any such breach.

6.3.4 The remedies provided in this Section 6 shall be in
addition to, and not in lieu of, any and all other
remedies of Employer at law or in equity.

-5-

<PAGE>

7. Miscellaneous.
--------------

7.1 Notice. Notices required or permitted to he given hereunder shall
be sufficient if in writing and delivered or deposited in the mail, postage
prepaid, certified mail, return receipt requested (or the equivalent in a
foreign country), addressed, if to Employer, at its principal place of business
and, if to Employee, at the address set forth in Employer's employee records or
to such other address as may be designated in writing hereafter by either party
hereto. All notices hereunder shall be effective: (a) five (5) days after
deposit in the mail; or (b) upon delivery, if delivered in person or by
commercial express service.

7.2 Burden Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of any successor of Employer and any
such successor shall be deemed substituted for Employer under the terms of this
Agreement. As used in this Agreement, the term "successor" shall mean any
person, firm, corporation or other business entity which at any time, whether by
merger, purchase or otherwise acquires all or substantially all of the assets or
business of Employer.

7.3 Entire Agreement. This Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment of Employee and no representations, promises, agreements or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing and signed by the parties intended to be bound. No
waiver of any provision of this Agreement shall be valid unless it is in writing
and signed by the parties against whom the waiver is sought to he enforced. No
valid waiver of any provision of this Agreement at any time shall be deemed a
waiver of any other provision of this Agreement at such time or any other time.

7.4 Arbitration. ln the event any dispute or controversy arising out
of this Agreement cannot be settled by Employer and Employee, such controversy
or dispute, at the election of either Employer or Employee, by written notice to
the other, may be submitted to arbitration in Phoenix, Arizona, and for this
purpose Employer and Employee each hereby expressly consent to such arbitration
and such place. In the event Employer and Employee cannot, within l5 days
following the election to submit the dispute or controversy to arbitration,
mutually agree upon an arbitrator to settle their dispute or controversy, then
Employer and Employee shall each select one arbitrator and the two arbitrators
shall select a third arbitrator. The decision of the majority of said
arbitrators shall be binding upon Employer and Employee for all purposes, and
judgment to enforce any such binding decision may be entered in the Superior
Count, Maricopa County, Arizona (and for this purpose Employer and Employee
hereby irrevocably consent to the jurisdiction of said court). If either
Employer or Employee fails to select an arbitrator within fifteen (15) days
after written demand from the other party to do so, then the Chief Judge in the
United States District Court of the District of Arizona shall select such other
arbitrator. At the election of either Employer or Employee, all arbitrators
shall be selected pursuant to the then existing rules and regulations of the
American Arbitration Association governing commercial transactions. At the
request of either Employer or Employee, arbitration proceedings shall be

-6-

<PAGE>

conducted in the utmost secrecy. In such case, all document, testimony and
records shall be available for inspection only for purposes of the arbitration
and only by either party and their respective attorneys and experts who shall
agree, in advance and in writing, to receive all such information in secrecy. In
all other respects, the arbitrators shall conduct all proceedings pursuant to
the Uniform Arbitration Act as adopted by the State of Arizona and the then
existing rules and regulations of the American Arbitration Association
governing commercial transactions. The costs of the arbitration and the
arbitrators shall be borne by the non-prevailing party, as determined by the
arbitrators, and each party shall bear their own attorney's fees.

7.5 Prohibition Against Assignment. This Agreement is personal to
Employee and Employee shall not assign or delegate any of his rights or
obligations hereunder without first obtaining the written consent of Employer.

7.6 Governing Law. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise by the
laws of the State of Arizona. The section headings used in this Agreement are
included so]ely for convenience and shall not affect or be used in connection
with the interpretation of this Agreement.

7.7 Severability. The provisions of this Agreement shall he deemed
severable and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions.

IN WITNESS WHEREOF, the parties have executed this document to he effective
the date first above written.

GUM TECH INTERNATIONAL, INC.,
a Utah corporation

By: /S/ JOHN EPERT
------------------------------------------
John Epert, President

(EMPLOYER)

/S/ RICHARD RATCLIFF
-------------------------------------------

(EMPLOYEE)

-7-

EMPLOYMENT AGREEMENT

EFFECTIVE DATE: August 14, 1996

EMPLOYMENT DATE: The date on which Gerald Kern can assume on a full time
basis, responsibility for the overall and day-to-day
operations of Employer, but in no event later than September
1, 1996

TRANSITION PERIOD: Commencing August 14, 1996 and continuing through a
transition period to expire at the discretion of Employer,
but in no event later than December 31, 1996

EMPLOYER: GUM TECH INTERNATIONAL, INC.
a Utah corporation

EMPLOYEE: JOHN EPERT

PURPOSE:
- --------

Employer is in the business of manufacturing, marketing and selling value
added gum products to wholesalers and distributors and in the retail and private
label markets (collectively, the "Business"). Employer desires to employ
Employee as an Executive Vice President of Employer, effective on the Employment
Date, and Employee desires to accept such employment on the terms, covenants and
conditions set forth in this Employment Agreement (this "Agreement").

AGREEMENTS:
- -----------

For the reasons set forth above, and in consideration of the mutual
promises and agreements set forth in this Agreement, Employer and Employee agree
as follows:

1. Employment: Duties.
-------------------

1.1 Subject to and in accordance with this Agreement, Employer employs
Employee as an Executive Vice President of Employer, effective on the Employment
Date, and Employee accepts employment with Employer subject to the general
supervision and pursuant to the orders, advice and direction of Employer. In his
capacity as an Executive Vice President, he will generally assist the President
and perform such other duties from time to time agreed upon by Employer and
Employee.

<PAGE>

2 Term. This Agreement shall become effective on the Effective Date and,
unless terminated sooner pursuant to Section 5, continue through December 31,
1997.

3. Compensation and Other Benefits.
-----------------------------------

3.1.1 During the Transition Period, a daily salary of
$3,583.50 per month, payable monthly, commencing on the
Effective Date, in arrears in two equal monthly
installments.

3.1.2 On the expiration of the Transition Period through the
expiration of the term of this Agreement, a monthly
salary of $2,000 per month, payable monthly, in arrears
in two equal monthly installments; provided, however,
that in the event that Employee is required to expend
in excess of 8O hours per month fulfilling his duties
hereunder, then Employer and Employee shall renegotiate
the monthly salary to be commensurate with the duties
hereunder.

4. Facilities. Employer shall provide and maintain (or cause to be
provided and maintained) such facilities, equipment, offices, secretarial help,
and other services and supplies as it deems necessary for Employee's performance
of his duties under this Agreement, as established from time to time by
Employer.

-2-

<PAGE>

5. Termination.
------------

5.1 This Agreement and Employee's employment hereunder may be
terminated at any time:

(a) Upon mutual agreement in writing.

(b) By Employee upon the material breach by Employer of any
of the material provisions of this Agreement.

(c) By Employer for Cause. For purposes of this Agreement,
the term "Cause" shall mean: (i) conduct on the part of
Employee which is intended to result directly or
indirectly in substantial gain or personal enrichment
at the expense of Employer; (ii) the material breach by
Employee of any of the provisions of this Agreement; or
(iii) the failure by Employee to substantially perform
his duties hereunder.

5.2 Notwithstanding the termination of this Agreement or of Employee's
employment hereunder, the parties hereto shall be required to carry out any
provision hereof which contemplate performance by them subsequent to such
termination, nor shall such termination affect any liability or obligation which
has accrued prior to such termination, including, but not limited to, accrued
but unpaid compensation and any liability for loss or damage on account of
default.

5.4 Upon termination of this Agreement, or whenever requested by
Employer, Employee shall immediately turn over to Employer all of Employer's
property, including all items used by Employee in rendering services hereunder,
that may be in Employee's possession or under his control.

-3-

<PAGE>

6. Covenant Not to Compete: Disclosure of Information.
---------------------------------------------------

6.1 Solicitation
------------

6.1.1 For a period of six months after the date of
termination of this Agreement, Employee shall not,
whether alone or as a partner, officer, director,
employee or shareholder (or other holder of an equity
interest) of, or consultant, advisor or lender to, any
other corporation, partnership or other entity, or as a
trustee, fiduciary or other representative, solicit
Employer's customers with respect to, engage in or have
any interest, including as a creditor, in any person,
partnership, corporation, association, or other
business entity, whether as employee, officer,
director, agent, consultant, stockholder or holder of
any right to any form of equity ownership, or otherwise
that engages in the Business.

6.1.2 Employee shall not, during or for a period of six (6)
months after the term of this Agreement, solicit any
employee, sales representative or independent
contractor of Employer for employment by any person,
firm, partnership, corporation, association or other
entity for any reason or purpose allied or related to
the Business whatsoever.

6.2 Non Disclosure.
---------------

6.2.1 Employee hereby recognizes and acknowledges that: (i)
Employee will be making use of, acquiring, and/or
adding to proprietary information of a special and
unique nature and value relating to and including, but
not limited to, such matters Employer's trade secrets,
systems, procedures, manuals, confidential reports,
lists of suppliers, research and development projects,
policies, processes, formulas, techniques, know-how and
facts relating to sales, advertising, mailing,
promotions, financial matters, customers, customer
lists, purchases or requirements or other methods used
and preferred by Employer in its operations, (ii) the
Company will disclose certain proprietary information
to Obligor including, but not limited to, the details
of any statistical or financial data, the operations
and structure of the business of Employer, and manuals,
forms, techniques, methods or procedures of Employer
used by or made available to Employee in the course of
Employee's employment (the information referenced to in
paragraphs 6.2.1 (i) and (ii) above are hereinafter
collectively referred to as the "Proprietary
Information").

-4-
<PAGE>

6.2.2 Employee hereby recognizes and acknowledges that the
Proprietary Information is a valuable, special and
unique asset of Employer's business.

6.2.3 Employee will not at any time, directly or indirectly
make use of, divulge or disclose any of the Proprietary
Information or any part thereof for any purpose
whatsoever to any person, firm, corporation,
association or other entity for any reason or purpose
whatsoever that has been obtained by, or disclosed to,
him as a result of his relationship with Employer.
Immediately upon request by Employer, Employee shall
return to Employer any and all materials relating to
Proprietary Information.

6.3 Acknowledgement.
---------------

6.3.1 Employee acknowledges that the covenants contained in
this Section 6 are a material inducement for Employer
to enter into this Agreement and to perform its
obligations hereunder and that the services Employee is
to render to Employer hereunder are of a special and
unusual character with a unique value to Employer.
Employee acknowledges that it would take at least six
(6) months for Employer to retain and train personnel
to replace Employee. Accordingly, Employee acknowledges
that the restrictions contained in this Section 6 are
reasonably necessary for the protection of Employer's
business and that a breach of any such restrictions
could not adequately be compensated by damages in an
action at law.

6.3.2 In the event of a breach or threatened breach by
Employee of any provision contained in this Section 6,
Employer shall be entitled to obtain, by posting an
appropriate bond, an injunction (preliminary or
permanent, or a temporary restraining order)
restraining Employee from the activity or threatened
activity constituting or that would constitute a
breach.

6.3.4 The remedies provided in this Section 6 shall be in
addition to, and not in lieu of, any and all other
remedies of Employer at law or in equity.

-5-

<PAGE>

7. Miscellaneous.
--------------

7.1 Notice. Notices required or permitted to be given hereunder shall
be sufficient if in writing and delivered or deposited in the mail, postage
prepaid, certified mail, return receipt requested (or the equivalent in a
foreign country), addressed, if to Employer, at its principal place of business
and, if to Employee, at the address set forth in Employer's employee records or
to such other address as may be designated in writing hereafter by either party
hereto. All notices hereunder shall be effective:(a) five (5) days after deposit
in the mail; or (b) upon delivery, if delivered in person or by commercial
express service.

7.2 Burden. Except as otherwise provided herein, this Agreement shall
be binding upon and inure to the benefit of any successor of Employer and any
such successor shall be deemed substituted for Employer under the terms of this
Agreement. As used in this Agreement,the term "successor" shall mean any person,
firm, corporation or other business entity which at any time, whether by merger,
purchase or otherwise acquires all or substantially all of the assets or
business of Employer.

7.3 Entire Agreement. This Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment of Employee and no representations, promises, agreements or
understandings, written or oral, not contained herein shall be of any force or
effect. No change or modification of this Agreement shall be valid or binding
unless it is in writing, and signed by the parties intended to be bound. No
waiver of any provision of this Agreement shall be valid unless it is in writing
and signed by the parties against whom the waiver is sought to be enforced. No
valid waiver of any provision of this Agreement at any time shall be deemed a
waiver of any other provision of this Agreement at such time or any other time.

7.4 Arbitration. In the event any dispute or controversy arising out
of this Agreement cannot be settled by Employer and Employee such controversy or
dispute, at the election of either Employer or Employee, by written notice to
the other, may be submitted to arbitration in Phoenix, Arizona, and for this
purpose Employer and Employee each hereby expressly consent to such arbitration
and such place. In the event Employer and Employee cannot, within 15 days
following the election to submit the dispute or controversy to arbitration,
mutually agree upon an arbitrator to settle their dispute or controversy, then
Employer and Employee shall each select one arbitrator and the two arbitrators
shall select a third arbitrator. The decision of the majority of said
arbitrators shall be binding upon Employer and Employee for all purposes, and
judgment to enforce any such binding decision may be entered in the Superior
Court. Maricopa County, Arizona (and for this purpose Employer and Employee
hereby irrevocably consent to the jurisdiction of said court). If either
Employer or Employee fails to select an arbitrator within fifteen (l5) days
after written demand from the other party to do so, then the Chief Judge in the
United States District Court of the District of Arizona shall select such other
arbitrator. At the election of either Employer or Employee, all arbitrators
shall be selected pursuant to the then existing rules and regulations of the
American Arbitration Association governing commercial transactions. At the
request of either Employer or Employee, arbitration proceedings shall be
conducted in the utmost secrecy. In such

-6-

<PAGE>

case, all documents, testimony and records shall be available for inspection
only for purposes of the arbitration and only by either party and their
respective attorneys and experts who shall agree, in advance and in writing, to
receive all such information in secrecy. In all other respects, the arbitrators
shall conduct all proceedings pursuant to the Uniform Arbitration Act as adopted
by the State of Arizona and the then existing rules and regulations of the
American Arbitration Association governing commercial transactions. The costs of
the arbitration and the arbitrators shall be borne by the non-prevailing party,
as determined by the arbitrators, and each party shall bear their own
attorneys'fees.

7.6 Governing Law. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise by the
laws of the State of Arizona. The section headings used in this Agreement are
included solely for convenience and shall not affect or be used in connection
with the interpretation of this Agreement.

7.7 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall nol affect the validity and enforceability of
the other provisions.

IN WITNESS WHEREOF the parties have executed this document to be effective
the date first above written.

GUM TECH INTERNATIONAL, INC.,
a Utah corporation

By: /S/ RICHARD RATCLIFF
-----------------------------------------
Richard Ratcliff, Chief Executive Officer

(EMPLOYER)

/S/ JOHN EPERT
-----------------------------------------
JOHN EPERT

(EMPLOYEE)

-7-

Exhibit 23.06

October 21, 1996

Gum Tech International, Inc.
4205 North Seventh Avenue
Phoenix, AZ 85013

Re: Registration Statement on Form SB-2

Ladies and Gentlemen:

We are counsel for Gum Tech International, Inc., a Utah corporation (the
"Company") in connection with the filing of a Registration Statement on Form
SB-2 covering the registration of 2,874,715 shares of Common Stock to be sold by
certain selling stockholders

We hereby consent to the use of our name under the caption "Legal Matters" in
the Prospectus constituting a part of the subject Registration Statement.

Very truly yours,

By: /S/ GARY A. AGRON
---------------------------
Gary A. Agron

GGA/mdi

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the use, in this Registration Statement on Form SB-2, of
our report dated January 18, 1996, except for Note 9 and Note 12 as to which the
date is March 4, 1996, relating to the financial statements of Gum Tech
International, Inc. for the years ended December 31, 1995 and 1994, and the
reference to our firm under the caption "Experts" in the Prospectus contained in
said Registration Statement.

/S/ ANGELL & DEERING
--------------------------------
Angell & Deering
Certified Public Accountants

Denver, Colorado
October 21, 1996