SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004

                                   FORM 10-K/A

(Mark One)

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

     For the fiscal year ended December 31, 2000

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

                           Commission File No. 0-27646


                          GUM TECH INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)


             UTAH                                       87-0482806
  (State or Other Jurisdiction              (I.R.S. Employer Identification No.)
of Incorporation or Organization)


                             246 East Watkins Street
                                Phoenix, AZ 85004
                                 (602) 252-1617
                    (Address of principal executive offices,
                Issuer's Telephone Number, Including Area Code)

          Securities registered pursuant to Section 12(g) of the Act:

                            No Par Value Common Stock

                             Nasdaq National Market

     Check whether the Registrant (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. YES [X]  NO [ ]

     Check if there is no disclosure  contained  herein of delinquent  filers in
response to Item 405 of Regulation  S-B, and will not be contained,  to the best
of the Registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of March 28, 2001,  9,187,047  shares of the  Registrant's  Common Stock
were  outstanding.  As of March 28, 2001,  the market value of the  Registrant's
Common Stock,  excluding  shares held by  affiliates,  was  approximately  $77.3
million.
<PAGE>
                                TABLE OF CONTENTS

                                                                            PAGE

PART I ....................................................................... 1

      ITEM 1.  BUSINESS ...................................................... 1

      ITEM 2.  DESCRIPTION OF PROPERTY ....................................... 6

      ITEM 3.  LEGAL PROCEEDINGS ............................................. 6

      ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........... 7

PART II ...................................................................... 8

      ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ...... 8

      ITEM 6.  SELECTED FINANCIAL DATA ....................................... 9

      ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS ...........................10

      ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...................20

      ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE ...........................20

PART III .....................................................................21

      ITEM 10. INFORMATION CONCERNING DIRECTORS, NOMINEES, AND
               EXECUTIVE OFFICERS ............................................21

      ITEM 11. EXECUTIVE COMPENSATION ........................................23

      ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ...............25

      ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................26

PART IV ......................................................................27

      ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K ........................27

Gum Tech International,  Inc. has restated its financial statements for the year
ended  December  31, 2000 to amortize  payment of  $1,625,000  received  for the
extension  of a  contract  over  the  three  month  term of the  extension.  The
$1,625,000 was originally  recorded as income in 2000. For further  information,
please see Note 2 and Note 16 in the Notes to Consolidated Financial Statements.

Unless otherwise  indicated in this filing,  "Gum Tech," "us," "we," "our", "the
Company"  and  similar  terms  refer to Gum  Tech  International,  Inc.  and its
subsidiaries.   The  Gum  Tech  name  and  logo  are   trademarks  of  Gum  Tech
International,  Inc.  and Zicam is a trademark  of Gel Tech,  LLC.  Other brands
names  and  trademarks  contained  in this  filing  are the  property  of  their
respective owners.

                                      -i-
<PAGE>
                                     PART I

ITEM 1. BUSINESS

INTRODUCTION

     We were  incorporated in Utah in 1991. Our principal  executive offices are
located at 246 E.  Watkins  Street,  Phoenix,  Arizona  85004 and our  telephone
number  is (602)  252-1617.  The  Company  researches,  develops,  manufactures,
markets and  distributes  products in the innovative  nutrient and drug delivery
systems market.  The Company's  current  operations are divided into two primary
groups described below.

ZICAM OPERATIONS

     Through a joint  venture with Zensano,  Inc. (the  successor in interest to
Bio-Delivery Technologies, Inc.), a subsidiary of Zengen, Inc., a privately-held
California  corporation,  we are  engaged  in the  manufacture,  marketing,  and
distribution of  health-related  products using a patented nasal gel technology.
The initial  product  marketed by this joint venture and  introduced in 1999 was
Zicam Cold Remedy, a homeopathic,  nasal gel product that has been formulated to
reduce the severity and duration of the common cold. In a study published in the
October 2000 issue of the ENT- Ear, Nose & Throat Journal, Zicam Cold Remedy was
shown to reduce the  duration of the common cold by an average of 75% when taken
at the onset of  symptoms.  The joint  venture  extended the Zicam brand name in
2000 by introducing Zicam Allergy Relief, which is designed to provide relief to
allergy  sufferers.  We entered into an operating  agreement  with  Bio-Delivery
Technologies  in 1999 under  which both  parties  transferred  their  respective
interests  in the patent  rights to the nasal gel  technology  in  exchange  for
membership  interests in Gel Tech, LLC, an Arizona limited liability company. We
have a 60% interest in the capital and profits of the joint  venture and Zensano
owns a 40% interest.

GUM OPERATIONS

     We develop and manufacture  specialty  chewing gum products for branded and
private  label  customers,  as well as  products  marketed  under our own brand.
Specialty chewing gums include vitamins,  herbals,  and active  over-the-counter
drug ingredients formulated to provide specific  health-related  benefits to the
user. We  manufacture  and continue to develop  specialty  chewing gums that are
formulated to:

     *    promote oral hygiene and breath freshness;

     *    promote weight management;

     *    reduce pain;

     *    relieve indigestion;

     *    contribute to energy and endurance;

     *    reduce the risk of osteoporosis; and

     *    reduce tobacco cravings.

     In 1998, following a significant management  restructuring,  we changed our
principal  strategy from  developing,  manufacturing,  and  distributing our own
branded  and  private  label gum  products  to  developing,  manufacturing,  and
packaging  specialty gum products for sale and distribution by major branded and

                                       1
<PAGE>
private  label  customers  that  we  believe  had  the  capital   resources  and
distribution  capability to promote and market specialty chewing gums on a large
national and international  scale. We adopted this change in strategy  primarily
because  we  did  not  have  the  financial  resources,  name  recognition,  and
distribution capability to successfully market and distribute our gums on a wide
scale.

     In July  2000,  we formed a joint  venture  with  Swedish  Match AB for the
purpose of developing,  manufacturing,  marketing,  and distributing non-tobacco
nicotine products  worldwide.  Under the terms of this agreement,  Swedish Match
through its  subsidiary,  Swedish Match UK, Ltd., owns 51% and we own 49% of the
joint  venture.  We  contributed  intellectual  property  related to chewing gum
products  containing nicotine and Swedish Match agreed to contribute $10 million
in  start-up  capital.  Swedish  Match,  based  in  Stockholm,   Sweden,  is  an
international  group which develops,  manufactures,  markets,  and  distributes,
through its subsidiaries worldwide, a broad range of tobacco products within the
OTP  (Other  Tobacco  Products)  category,  with  smokeless  tobacco as its core
business,  along with cigars and pipe tobacco,  as well as matches and lighters.
Swedish  Match's  extensive  range of  products is sold in 140  countries,  with
annual sales totaling approximately $1 billion.

RECENT DEVELOPMENTS

     On March 14, Gum Tech entered into a definitive  Asset  Purchase  Agreement
with Wm. Wrigley Jr. Company,  a Delaware  corporation,  which  contemplates the
sale of substantially all of our assets related to our gum operations to Wrigley
in exchange  for  $25,000,000  in cash and other  consideration.  Gum Tech would
retain certain assets, including cash, accounts receivable,  its 60% interest in
Gel Tech, LLC, which markets and distributes Zicam Cold Remedy and Zicam Allergy
Relief,  and its 49% interest in a joint  venture with Swedish  Match formed for
the purpose of developing and marketing a non-tobacco nicotine gum. Our Board of
Directors has elected to submit the proposed sale of assets to our  stockholders
for approval at a Special Meeting scheduled for July 19, 2001.

     We  believe  that the  proposed  sale of assets to  Wrigley  is in the best
interests of the Company and our  stockholders  and will  improve our  financial
performance in the long-term.  Since  inception,  we have been unable to achieve
profitability with respect to our gum operations and unable to obtain sufficient
capital  to  effectively   develop,   market  and  distribute  our  own  brands.
Furthermore,  due to our  inability to increase  sales  attributable  to our gum
operations, we have not been able to maintain full capacity of our manufacturing
plant.  Additionally,  sales  attributable  to our  contract  manufacturing  gum
operations have declined significantly due to financial difficulties encountered
by several of our major customers.

     The  proceeds of the  proposed  sale of assets  would  enable us to shed an
unprofitable  component of our operations and allow us to focus on marketing and
promoting  the Zicam line of products.  Furthermore,  we believe that we will be
better  positioned  to pursue other  potential  opportunities  in the market for
innovative  nutrient and drug delivery systems and provide financial support, if
necessary, to our joint ventures with Zensano, Inc. and Swedish Match AB.

     The Company  intends to  distribute a proxy  statement to  stockholders  in
connection with the special meeting. The proxy statement will contain additional
information   about  the  proposed   sale  of  assets,   including  the  Board's
recommendation   with  respect  to  the  Wrigley  transaction  and  the  reasons

                                       2
<PAGE>
underlying its recommendation. The proposed sale of assets to Wrigley is subject
to a number of closing  conditions,  including,  but not limited to, approval by
the Company's stockholders.

STRATEGY

     We currently are pursuing the following business strategies:

     *    EFFECTIVELY  MANAGE THE  DEVELOPMENT  AND GROWTH OF THE GEL TECH,  LLC
          JOINT VENTURE AND THE MANUFACTURING AND MARKETING OF ZICAM COLD REMEDY
          AND ZICAM  ALLERGY  RELIEF.  Both Zicam Cold Remedy and Zicam  Allergy
          Relief  are  relatively  new  products  that we  believe  represent  a
          significant opportunity for substantial growth in revenue. In order to
          realize this anticipated growth in revenue, we must effectively manage
          the development and growth of our joint venture with Zensano and Zicam
          Cold Remedy and Zicam Allergy Relief must achieve  significant  market
          acceptance. In addition, we are exploring product line extensions that
          would further utilize Gel Tech's nasal gel technology.

     *    CONTRIBUTE  TO THE  DEVELOPMENT  AND GROWTH OF THE SWEDISH MATCH JOINT
          VENTURE AND THE RESEARCH, DEVELOPMENT AND MANUFACTURING OF NON-TOBACCO
          NICOTINE  PRODUCTS.  We believe  the  development,  distribution,  and
          marketing of non-tobacco  nicotine  products through the joint venture
          represents a significant  opportunity  for  substantial  growth in our
          revenue.

     *    CONTINUE  TO  RESEARCH  AND DEVELOP NEW  SPECIALTY  GUM  PRODUCTS.  We
          possess considerable gum formulation expertise,  and together with our
          existing and potential customers,  are working to develop new products
          in the specialty chewing gum market.

     *    PARTNER WITH MAJOR CONSUMER PRODUCT COMPANIES TO INCREASE SALES. Since
          early  1998,  we have  pursued a  strategy  of  partnering  with major
          consumer  products   companies  that  we  believe  had  the  financial
          resources  and  distribution   capability  to  market  and  distribute
          specialty chewing gum products on a national and international scale.

     *    IMPROVE  MANUFACTURING  OPERATIONS TO ENHANCE  EFFICIENCY.  During the
          past  few  years,  we  have  expanded  our  manufacturing  operations,
          including  adding  personnel  and  additional  packaging  and  coating
          equipment,  to meet  expected  increases  in demand  for  several  gum
          products.

     *    ANALYZE AND PURSUE OTHER  OPPORTUNITIES IN THE DRUG DELIVERY  BUSINESS
          MARKET.   We  have   researched   and  continue  to  analyze   various
          opportunities to launch additional products in the innovative nutrient
          and drug  delivery  systems  market,  which  entails  the  delivery of
          over-the-counter  drug  and  other  homeopathic   ingredients  through
          alternative drug delivery systems.

PRODUCT INFORMATION

     The table below describes certain  information  related to specific chewing
gum products currently manufactured by us for other consumer products companies.

                                       3
<PAGE>
<TABLE>
<CAPTION>
       PRODUCT                            INTENDED BENEFITS TO USER                  MARKET              DISTRIBUTED BY
       -------                            -------------------------                  ------              --------------
<S>                               <C>                                           <C>                   <C>
BreathAsure(R)dental gum          Promotes oral hygiene and breath freshness    Oral care             HealthAsure
Insta-Fresh(TM)dental gum         Promotes oral hygiene and breath freshness    Oral care             Melaleuca
Private label dental gums         Promote oral hygiene and breath freshness     Oral care             Ranir/DCP
Aspergum(R)                       Pain relief                                   OTC drug              Insight Pharmaceuticals
Chooz                             Antacid and prevents osteoporosis             OTC drug              Insight Pharmaceuticals
Herbalife NRG(R)                  Improves energy & endurance                   Dietary supplement    Herbalife
Herbalife Chew Slim(R)            Promotes weight management                    Dietary supplement    Herbalife
Pharma-Green (seven varieties)    Various                                       Dietary supplement    Pharma-Green Ltd.
Brain Gum                         Improves brain function                       Dietary supplement    KR Research, Inc.
</TABLE>

MANUFACTURING AND PACKAGING

     Both  Zicam Cold  Remedy and Zicam  Allergy  Relief  are  manufactured  and
packaged by Botanical Laboratories,  Inc. of Ferndale,  Washington in accordance
with current good  manufacturing  processes.  The finished product is shipped to
our  warehouse  facility in Phoenix,  Arizona for  warehousing  and  shipment to
customers.

     We  manufacture  all of our gum  products,  including  those  marketed  and
distributed by others. The manufacture of specialty chewing gums involves:

     *    storing bulk raw materials and "fine" raw  materials,  such as flavor,
          colors and active ingredients;

     *    producing and mixing the gum base in large stainless steel mixers;

     *    extruding the gum into selected sizes and shapes;

     *    coating the gum, generally with a sugarless coating solution;

     *    branding the product if required;

     *    packaging the gum in blister packages; and

     *    packaging  the  blisters,  according to customer  specifications,  for
          shipment.

     All of our gum products  contain one or more active  ingredients  which are
added  either to the gum center in the mixing  stage or  included in the coating
solution.

     Prior to  commencing  production  of the chewing gum, we record lot numbers
for all  ingredients,  examine and file  certificates  of  ingredients,  perform
quality  control  tests,  and sanitize  equipment  and  utensils.  Our personnel
conduct additional  quality control tests throughout the manufacturing  process.
We  manufacture  our products in  compliance  with  current  good  manufacturing
procedures requiring written standard operating procedures.

COMPETITION

     We face significant competition from a large number of major drug companies
involved in selling a variety of cough,  cold,  upper  respiratory,  and allergy
remedies that compete  directly with Zicam Cold Remedy and Zicam Allergy Relief.
Most of these  competitors  have  greater  name  recognition,  more  established

                                       4
<PAGE>
brands,  wider  distribution  capabilities  and greater  financial and marketing
resources than we do.

     Although the specialty gum market is emerging as a market category distinct
from the traditional, established confectionery chewing gum market, Gum Tech and
the companies to whom we sell face  significant  competition in each of the four
categories in which we operate. These categories include oral care products, OTC
drugs,  smoking cessation products,  and dietary  supplements.  In the oral care
products market,  the dental gum products that we make for a number of customers
compete directly with Arm & Hammer,  Trident Advantage,  and V-6 dental gums. We
manufacture OTC drug-related gum products, including Aspergum, an analgesic, and
Chooz, an antacid/calcium  supplement. Each of these products competes generally
with analgesics and antacids produced and marketed by a number of major consumer
products companies.  We are also pursuing opportunities in the smoking cessation
market  through  our  joint  venture  with  Swedish  Match,  which is  currently
dominated by the  Nicorette  product  marketed by Pharmacia  and Upjohn.  In the
dietary  supplement market, our various gum products compete with a large number
of non-gum dietary supplement products.

     Competitive factors in the chewing gum industry include price,  flavor, and
name recognition resulting from media advertising.  We historically have not had
the  capital  resources,  marketing  and  distribution  networks,  product  name
recognition,  and advertising  budget to produce or introduce chewing gum brands
that could compete effectively with the multi-national chewing gum manufacturers
and large  specialty  chewing  gum  marketers.  Accordingly,  we have  adopted a
strategy of partnering  with major branded and private label  customers  that we
believe possess the resources and  capabilities  needed to market and distribute
gum products on a wide scale.

FDA AND OTHER GOVERNMENT REGULATION

     We are  subject to various  federal,  state and local  laws  affecting  our
business.  All of our products 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.   In  addition,  some  of  our  products  are  considered  "drugs."
Consequently, manufacture of these products must comply with "good manufacturing
practices"  mandated by the FDA,  which  prescribes  specific  requirements  and
procedures for the  manufacture of  FDA-regulated  drug products.  If we fail to
comply with these requirements and procedures, the FDA has the right to restrict
the sale of or remove such products from the market.  We believe that all of our
products comply with all regulatory requirements including the FDA manufacturing
standards and practices for drug products.

     Our  advertising  claims made with  respect to all of our products are also
subject to the jurisdiction of the FDA and the Federal Trade Commission. In both
cases,  we are required to obtain  scientific data to support any advertising or
labeling of health claims we make concerning our products.

     In addition,  our chewing gum manufacturing  facility and the facilities of
Botanical  Laboratories  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  our
manufacturing  operations.  We are  also  subject  to  federal  and  state  laws
establishing minimum wages and regulating overtime and working conditions.

TRADEMARKS, TRADE NAMES, AND PROPRIETARY RIGHTS

     We  own  a   perpetual   non-exclusive   license   to  use   Microdent,   a
plaque-reducing  agent,  in our coated  chewing gum  products.  Microdent is the

                                       5
<PAGE>
critical ingredient in the chewing gums that we manufacture for BreathAsure.

     We routinely seek trademark protection from the United States Patent Office
"USPO" and from similar agencies in foreign countries for chewing gum brands and
Zicam. Despite these protections,  we may not be able to successfully defend any
trademarks granted to us against claims from or use by competitors. In addition,
trademark  applications  may not be approved by the USPO or any similar  foreign
agency.

     We consider  some of our  chewing  gum  formulations  and  processes  to be
proprietary in nature and rely upon a combination of  nondisclosure  agreements,
other  contractual  restrictions,   and  trade  secrecy  laws  to  protect  this
proprietary  information.  Despite  these  precautions,  these  steps may not be
adequate to prevent  misappropriation  of our  proprietary  information  and our
competitors could  independently  develop chewing gum formulations and processes
that are substantially equivalent or superior to those that we develop.

EMPLOYEES

     As  of  December  31,  2000,  our  gum/corporate   operations  employed  68
individuals,  including two executive officers, 48 manufacturing,  warehouse and
quality  control  personnel,  four research and  development  personnel,  and 14
administrative/sales personnel. As of December 31, 2000, Gel Tech employed eight
executive and administrative personnel in its Woodland Hills, CA office.

ITEM 2. DESCRIPTION OF PROPERTY

     We lease an  approximately  28,000  square foot  building for our principal
executive offices and chewing gum manufacturing  facilities at 246 East Watkins,
Phoenix, Arizona 85004. Our ten-year lease (with two three-year renewal options)
for this building  expires on December 2005. The monthly rental expense for this
property currently is $12,700. In September 1998, we leased an additional 31,000
square foot  building  located  near our  executive  offices  and  manufacturing
facility to house our warehouse and packaging  operations  for a five year term,
subject  to a five  year  renewal  option.  The  monthly  rent on this  building
currently is $12,800.

ITEM 3. LEGAL PROCEEDINGS

LITIGATION

     On October 16,  1996, a lawsuit was filed  against us and other  parties in
the  United  States  District  Court for the  Central  District  of  California,
CV-95-9784.  The action is entitled GCN Products, Inc. vs. Roy Kelly, et al. The
complaint,  as it relates to us, principally alleged that we engaged in unlawful
rebates,  appropriations and overcharges,  commercial bribery,  fraud and unjust
enrichment.  On  September  4,  1998,  the court  granted a motion  for  summary
judgment in our favor,  and  dismissed  the  plaintiff's  claims  against us and
certain  current and former  directors.  The ruling  dismissing  the Company and
certain other  plaintiffs has been appealed to the U.S. Court of Appeals for the
Ninth Circuit. The Company intends to vigorously defend this action.

     On January  27,  1999,  an action was filed  against us and  certain  other
parties in the  Superior  Court of the State of Arizona in and for the County of
Maricopa,   CV-99-01528,  by  Paul  F.  Janssens-Lens.   The  complaint  alleged
intentional interference with business relations, intentional misrepresentation,
negligent misrepresentation, securities fraud, and consumer fraud. The plaintiff

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<PAGE>
sought  compensatory  damages of $720,000,  unspecified  punitive  damages,  and
attorneys'  fees and costs.  Although the Company  denied any wrongdoing in this
matter,  the Company  chose to settle this claim to avoid the cost of litigation
and risk of an unfavorable  outcome.  Pursuant to the  settlement,  Gum Tech has
agreed to pay $150,000 in 2001.

     On June 2, 1999,  we filed a complaint  in the  Superior  Court of Maricopa
County,  Arizona against DJ Ltd. ("DJ"),  CIV  99-1136-PHX-PGR  (D. Ariz.).  Our
complaint  sought a  declaratory  judgment that DJ was not owed any fee under an
agreement  entered into between the parties  pursuant to which DJ claimed it was
owed a financial advisory fee and certain other  consideration  arising from the
Citadel  financing in 1999.  DJ removed the case to the United  States  District
Court for the District of Arizona and filed a counterclaim. In its counterclaim,
DJ alleges that we breached  the contract  between the parties and that Gum Tech
has been unjustly  enriched.  DJ seeks  damages in the amount of $480,000,  plus
costs, expenses and warrants to purchase 50,000 shares of Gum Tech common stock.
DJ also seeks a declaratory  judgment confirming its version of its rights under
the agreement.

     On October 21, 1999, an action was filed  against us in the Superior  Court
of the State of California in and for the County of Los Angeles,  case number BC
218 878, by International  Interest Group, Inc.  ("IIG").  The complaint alleged
the breach of an oral finder's fee agreement between the parties relating to the
introduction  to Gum Tech of certain  individuals  affiliated  with Bio Delivery
Technologies  in 1996.  BioDelivery  Technologies  and Gum  Tech  formed a joint
venture in 1999 to manufacture, market and distribute products utilizing a nasal
gel technology.  The complaint  sought  unspecified  general  contract  damages,
declaratory  relief,  and an  accounting.  We  removed  the action to the United
States  District  Court for the Central  District of  California  on February 2,
2000.  Although the Company  denied the existence of the finder's fee agreement,
the Company  chose to settle this claim in order to avoid the cost of litigation
and the risk of an unfavorable  outcome.  Pursuant to the settlement,  Gel Tech,
LLC has agreed to pay $310,000 in 2001.

     On  November  9, 1999,  The Quigley  Corporation  commenced a civil  action
against Gum Tech, Inc., Gel Tech Industries,  Inc., and Gel Tech,  L.L.C. in the
United  States  District  Court for the Eastern  District of  Pennsylvania.  The
complaint  alleges  infringement of a patent arising from the defendants' use of
Zicam.  The complaint seeks  compensatory  damages and injunctive  relief.  In a
ruling on April 20, 2000, the judge in the case denied a motion for  preliminary
injunctive relief and subsequently certified three issues of law of the case for
immediate  appeal to the United States Court of Appeals for the federal circuit;
however,  the appeal was denied.  Consequently,  the case is scheduled for trial
before  the  district  court in late  2001.  Each of the  defendants  denies the
allegations of the complaint and intends to vigorously defend this action.

     On November 8, 2000, Gel Tech,  LLC filed a complaint in the U.S.  District
Court for the District of Arizona against AccuMed, Inc. CIV 00-141-PHX-PGR.  Our
complaint  alleges claims of patent  infringement,  copyright  infringement  and
unfair competition concerning a cold remedy product manufactured and distributed
by AccuMed. We seek compensatory damages and injunctive relief.

     We are not  involved  as a party in any other legal  proceeding  other than
various  claims and lawsuits  arising in the normal course of business,  none of
which,  in the  opinion  of our  management,  is  individually  or  collectively
material to our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.

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<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock has traded on the Nasdaq  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 Nasdaq  National  Market,  but does not include  retail
markup, markdown or commissions.

                                               MARKET PRICE
                                          ----------------------
                                             HIGH         LOW
                                          ---------    ---------
FISCAL YEAR 1999
First Quarter ..........................  $ 14.6719    $   8.375
Second Quarter .........................  $  11.875    $  9.5625
Third Quarter ..........................  $ 13.5625    $   10.75
Fourth Quarter .........................  $  20.375    $   12.50

FISCAL YEAR 2000
First Quarter ..........................  $  33.875    $ 14.5625
Second Quarter .........................  $  15.125    $    9.25
Third Quarter ..........................  $ 17.0625    $ 11.3125
Fourth Quarter .........................  $   17.25    $    6.50

FISCAL YEAR 2001
First Quarter (through March 28, 2001)..  $   9.875    $  6.9688


     As of  March  26,  2001,  Gum  Tech  had  approximately  5,923  record  and
beneficial stockholders.

DIVIDEND POLICY

     We have paid only  limited  cash  dividends on our common stock in the past
and intend to retain earnings, if any, for use in the operation and expansion of
the business. The amount of future dividends,  if any, will be determined by the
Board  of  Directors   based  upon  earnings,   financial   condition,   capital
requirements and other conditions.

                                       8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

     The following  sets forth selected  historical  financial data for Gum Tech
for each of the years in the  five-year  period ended  December  31,  2000.  The
selected  annual  historical  statement of operations  and balance sheet data is
derived from Gum Tech's financial  statements  audited by independent  auditors.
For  additional  information,  see the financial  statements of Gum Tech and the
notes thereto included  elsewhere in this report.  The following table should be
read in  conjunction  with Item 7,  "Management's  Discussion  and  Analysis  of
Financial  Condition  and Results of  Operations"  and is qualified by reference
thereto and to Gum Tech's financial statements and notes thereto.

<TABLE>
<CAPTION>
                                                  2000         1999        1998        1997        1996
                                                --------     --------     -------     -------     -------
<S>                                             <C>          <C>          <C>         <C>         <C>
Net sales                                       $ 13,378     $ 15,587     $ 5,357     $ 3,777     $ 3,116
Net income (loss) applicable to common stock    $ (8,149)    $ (1,012)    $(6,261)    $(5,399)    $(3,388)
Net income (loss) per share of common stock     $   (.91)    $  (0.14)    $ (0.97)    $ (1.02)    $ (0.77)
Dividends per share                             $     --     $     --     $    --     $    --     $    --
Shares outstanding at year end                     9,047        8,321       6,858       5,856       4,949
Total assets                                    $ 16,981     $ 20,028     $ 7,900     $ 9,685     $ 7,458
Long term obligations                           $     --     $  2,241     $ 2,380     $ 3,785     $ 1,488
Stockholders' equity                            $ 10,448     $ 12,702     $ 3,718     $ 4,673     $ 5,283
</TABLE>

                                       9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS


OVERVIEW

     Gum Tech has a 60% interest in the capital and profits of Gel Tech, LLC but
reports  financial  results  of Gel  Tech,  LLC  on a  consolidated  basis.  The
information   that  follows  is  an  analysis  of  the  Company's  two  business
segments--Zicam  operations and chewing gum operations.  Corporate  expenses not
specifically  related to either of the Company's  current business  segments are
reflected in chewing gum operations.

RESULTS OF OPERATIONS  FOR THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1999

     The following table details certain financial information for our Zicam and
chewing gum operations for the year ended December 31, 2000:

<TABLE>
<CAPTION>
                                                ZICAM           CHEWING GUM        CONSOLIDATED
                                             ------------       ------------       ------------
<S>                                          <C>                <C>                <C>
Net sales                                    $ 10,817,286       $  2,560,603       $ 13,377,889
Cost of sales                                   3,410,904          3,740,999          7,151,903
                                             ------------       ------------       ------------
Gross profit                                    7,406,382         (1,180,396)         6,225,986
Operating expenses                             13,660,585          3,092,581         16,753,166
Research and development                          433,560            348,823            782,383
                                             ------------       ------------       ------------
Income (loss) from operations                  (6,687,763)        (4,621,800)       (11,309,563)
Interest and other income                         100,032            872,331            972,363
Interest expense                                   80,182            378,278            458,460
                                             ------------       ------------       ------------
Income (loss) before income tax
  and minority interest                      $ (6,667,913)      $ (4,127,747)      $(10,795,660)
                                             ============       ============       ============
</TABLE>

                                       10
<PAGE>
ZICAM OPERATIONS

     Certain  information is set forth below for our Zicam operations  expressed
in dollars and as a percentage of net sales for the periods indicated:


                                             YEARS ENDED DECEMBER 31
                                   -------------------------------------------
                                          2000                       1999
                                   -------------------        ----------------
Net sales                          $ 10,817,286    100%       $9,593,447   100%
Cost of sales                         3,410,904     32         2,703,509    28
                                   ------------   ----        ----------   ---
Gross profit                          7,406,382     68         6,889,938    72
Operating expenses                   13,660,585    126         3,263,180    34
Research and development                433,560      4           241,893     3
                                   ------------   ----        ----------   ---
Income (loss) from operations        (6,687,763)   (62)        3,384,865    35
Interest and other income               100,032      1            50,428     1
Interest expense                         80,182      1                --    --
                                   ------------   ----        ----------   ---
Income (loss) before income tax
  and minority interest            $  6,667,913    (62)%      $3,435,293    36%
                                   ============   ====        ==========   ===


     NET SALES. Net sales increased to  approximately  $10.8 million in 2000, or
13% above the 1999 level of  approximately  $9.6 million.  A comparison of sales
between the two periods is affected by several factors.  First,  both Zicam Cold
Remedy and Zicam  Allergy  Relief are highly  seasonal  products.  Consequently,
differences  in the  severity  and  timing of the cold and  allergy  seasons  in
different  periods will have a significant  impact on annual sales  comparisons.
For example, with respect to Zicam Cold Remedy, the 1999-2000 cold season peaked
very early and  subsequently  dropped off rapidly,  whereas the  2000-2001  cold
season began very slowly,  but continued at higher levels into the first quarter
of 2001. Second,  both Zicam Cold Remedy and Zicam Allergy Relief are relatively
new products. Zicam Cold Remedy and Zicam Allergy Relief were introduced in 1999
and 2000,  respectively.  Sales of Zicam Cold  Remedy in 1999 were  impacted  by
sizeable introductory  shipments to retailers after receiving extensive national
publicity in the fourth quarter of 1999. Zicam Allergy Relief has also benefited
from  introductory  shipments  in its  introductory  year of 2000  but to a much
lesser  extent  as  that  product  has  not  yet  achieved  the  same  level  of
distribution, publicity, or marketing attention as Zicam Cold Remedy.

     Approximately  two-thirds  of 2000 sales  relate to Zicam  Cold  Remedy and
one-third to Zicam  Allergy  Relief.  All of the 1999 sales relate to Zicam Cold
Remedy.  The  decline in sales for Zicam Cold  Remedy from the prior year is due
primarily to the seasonality described above, specifically the difference in the
timing and severity of the two cold seasons, as well as the extremely high level
of  introductory  sales in the fourth quarter of 1999. In addition,  the Company
believes that retailers  retained excess inventories of Zicam Cold Remedy at the
end of the 1999-2000  cold season,  which resulted in lower sales to the Company
in subsequent  quarters than would otherwise be expected.  The Company  believes
that retailers'  current inventory levels of Zicam Cold Remedy are substantially
less than last year.

     Sales of Zicam  Allergy  Relief have  increased  steadily  throughout  2000
following its introduction earlier in the year, an increase the Company believes
was partially in response to the Company's  extensive  advertising  campaign for
Zicam Cold Remedy.  The Company  intends to focus its  marketing  efforts in the
second and third quarters of 2001 on Zicam Allergy Relief.

     COST OF SALES. Cost of sales increased from  approximately  $2.7 million in
1999 to  approximately  $3.4 million in 2000 principally due to the higher level
of net sales.

     GROSS PROFIT.  Gross profit  increased to  approximately  $7.4 million from
approximately  $6.9 million in the prior year reflecting the higher level of net
sales.

     OPERATING  EXPENSES.  Operating expenses increased to $13.7 million largely
due to a higher level of advertising  expenses of  approximately  $10.0 million.
The increase in  advertising,  relative to sales  levels,  is largely due to the

                                       11
<PAGE>
Company's  decision to significantly  increase its advertising budget to promote
Zicam Cold Remedy and to spend the bulk of those  advertising funds early in the
2000-2001  cold season in order to establish  the brand prior to the peak of the
cold  season.  The  increased   advertising   budget,   together  with  sizeable
advertising  expenses incurred late in the 1999-2000 cold season,  resulted in a
higher level of  advertising  costs for the annual 2000 period.  The Company has
not spent  significant  funds advertising Zicam Allergy Relief but intends to do
so during the peak of the  allergy  season in the second and third  quarters  of
2001.  Operating  expenses also  increased due to an increase in legal  expenses
arising  from  the  on-going  patent  infringement   lawsuit  with  The  Quigley
Corporation and a one-time $310,000 settlement cost of another lawsuit. See Item
3. Legal Proceedings.

     RESEARCH AND DEVELOPMENT.  Research and development expenses increased from
the on-going clinical work on both Zicam Cold Remedy and Zicam Allergy Relief.

     INTEREST AND OTHER INCOME.  Interest income increased due to a higher level
of cash maintained during 2000.

     INTEREST  EXPENSE.  Gel Tech, LLC incurred  interest expense in conjunction
with its  borrowings  under its bank credit  facility and on amounts owed to Gum
Tech  for  services  rendered.  As of  December  31,  2000,  Gel  Tech,  LLC had
borrowings of $1.0 million  outstanding  under its bank credit  facility but was
current in amounts owed to Gum Tech.

     NET INCOME.  Net income  decreased  primarily due to the large  advertising
expenses  incurred  to  establish  the Zicam Cold  Remedy  brand and to sizeable
introductory  shipments  to retailers of Zicam Cold Remedy in 1999 that were not
repeated in 2000.

CHEWING GUM OPERATIONS

     Information is set forth below for our chewing gum operations  expressed in
dollars and as a percentage of net sales for the periods indicated:

                                               YEAR ENDED DECEMBER 31
                                    -----------------------------------------
                                           2000                    1999
                                    ------------------     ------------------
Net sales                           $ 2,560,603    100%    $ 5,993,093    100%
Cost of sales                         3,740,999    146       4,907,995     82
                                    -----------   ----     -----------   ----
Gross profit                         (1,180,396)   (46)      1,085,098     18
Operating expenses                    3,092,581    121       2,258,684     38
Research and development                348,823     14         422,555      7
                                    -----------   ----     -----------   ----
Income (loss) from operations        (4,621,800)  (181)     (1,596,141)   (27)
Interest and other income               872,331     34          73,136      1
Interest expense                        378,278     14       1,311,792     22
                                    -----------   ----     -----------   ----
Income (loss) before income taxes
  and minority interest             $(4,127,747)  (161)%   $(2,834,797)   (48)%
                                    ===========   ====     ===========   ====

     NET SALES. Net sales decreased to approximately  $2.56 million for the year
2000  compared  to $5.99  million in 1999.  Sales to all of the  Company's  five
principal contract customers declined. This decrease was offset in part by sales
to a new customer,  Melaleuca,  of a dental gum. Although sales to the Company's
current contract  customers will fluctuate from quarter to quarter,  the Company
does not expect any  significant  growth in sales to result from these  existing
customers.  Consequently,  growth in sales from gum operations is dependent upon
the addition of new  customers,  including  the joint venture  established  with

                                       12
<PAGE>
Swedish Match to develop and market a nicotine gum and  potential  relationships
to develop and market gum products with other major consumer products companies.
There can be no assurance,  however, that the Company will finalize these or any
other  contractual  arrangements,  or  that  any  of  these  relationships  will
ultimately prove successful.

     COST OF SALES.  Cost of sales decreased to approximately  $3.7 million from
$4.9 million in 1999 reflecting the lower level of sales.

     GROSS PROFIT. Gross profit (loss) decreased due to the lower level of sales
and  decreased  as a  percentage  of  sales  due  to the  high  level  of  fixed
manufacturing costs relative to the level of sales.

     OPERATING  EXPENSES.  Operating  expenses  increased to approximately  $3.1
million  from  $2.3  million  in 1999.  This  increase  was  primarily  due to a
write-down  totaling  approximately  $400,000 of two  customer  accounts  and an
increase in legal  expenses of  approximately  $367,000.  At year-end two of the
Company's major gum customers were experiencing  severe financial  difficulties;
subsequently,  BreathAsure  filed for Chapter 11 bankruptcy  reorganization  and
Heritage Consumer Products ceased operations.  BreathAsure has subsequently sold
its assets,  including  the rights to its  products,  to  Nature's  Pride and is
continuing to operate under the HealthAsure brand name. In 2001, the Company has
continued to sell relatively  small amounts of gum to BreathAsure,  as debtor in
possession of the bankruptcy  estate, and to HealthAsure on a "cash on delivery"
basis.  Heritage  Consumer  Products sold off all of its brands,  except for the
Acutrim brand,  to Insight  Pharmaceuticals.  The Company has sold both Aspergum
and Chooz gum products to Insight in 2001 on a cash in advance basis.

     The increase in legal expense reflects a higher level of litigation expense
including a one-time cost of $150,000 to settle an outstanding lawsuit. See Item
3. Legal Proceedings.

     RESEARCH AND  DEVELOPMENT.  The reported amount of research and development
expenses declined  approximately $70,000 from the prior year. However,  research
and  development  expenses  billed to the joint  venture with  Swedish  Match of
approximately $600,000 are excluded from the 2000 amount.

     INTEREST  AND  OTHER  INCOME.   Interest  and  other  income  increased  to
approximately  $.9 million  primarily due to a $1.625  million cash payment from
Procter & Gamble Co. in conjunction with a Joint  Development  Agreement between
the two companies  which is being  amortized to income over a three month period
and $689,000 was recognized as income in 2000.

     INTEREST  EXPENSE.  Interest  expense  decreased  to  $378,000 in 2000 from
approximately  $1.3  million  in  1999  due to the  repayment  of the  Company's
outstanding  debt in the first quarter of 2000.  The  Company's  gum  operations
currently do not have any significant outstanding debt.

     INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST.  Net
loss increased to  approximately  $4.1 million  primarily due to the decrease in
sales from the prior period.

                                       13
<PAGE>
RESULTS OF OPERATIONS  FOR THE YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR
ENDED DECEMBER 31, 1998

     The following table details certain financial information for our Zicam and
chewing operations for the year ended December 31, 1999:

                                        ZICAM      CHEWING GUM    CONSOLIDATED
                                      ----------   -----------    ------------
Net sales                             $9,593,447   $ 5,993,093    $15,586,540
Cost of sales                          2,703,509     4,907,995      7,611,504
                                      ----------   -----------    -----------
Gross profit                           6,889,938     1,085,098      7,975,036
Operating expenses                     3,263,180     2,258,684      5,521,864
Research and development                 241,893       422,555        664,448
                                      ----------   -----------    -----------
Income (loss) from operations          3,384,865    (1,596,141)     1,788,724
Interest and other income                 50,428        73,136        123,564
Interest expense                              --     1,311,792      1,311,792
                                      ----------   -----------    -----------
Income (loss) before income tax
  and minority interest               $3,435,293   $(2,834,797)   $   600,496
                                      ==========   ===========    ===========

ZICAM OPERATIONS

     Zicam  sales and  operations  began  January  1,  1999.  As a  result,  the
financial results for Zicam operations cannot be compared to the prior period.

     For the year ended December 31, 1999, Zicam  operations  recorded net sales
of  approximately  $9.6  million.  The bulk of Zicam sales  occurred late in the
fourth quarter of 1999 after widespread  national publicity of Zicam Cold Remedy
in November  1999  resulted in  unexpectedly  high demand for this new  product.
Initially,  production of Zicam Cold Remedy could not be increased  sufficiently
to meet this high level of demand. Consequently, deliveries of Zicam Cold Remedy
were delayed.  Due to the highly  seasonal nature of cold remedies such as Zicam
Cold Remedy and a relatively short cold season, these delays limited our ability
to realize the full potential of Zicam sales for 1999-2000 cold season.

     Gross profit on Zicam  operations for the 12 months ended December 31, 1999
was approximately $6.9 million, or 72% of net sales.  Operating expenses of $3.3
million were recorded for this period, of which  approximately $2.25 million was
spent or accrued for advertising, sales commissions,  public relations and other
sales  expense.  Research and  development  expenses of $241,893 for this period
largely  reflect the cost of on-going  clinical work  associated  with the Zicam
line of products.  Interest and other income largely  reflects  interest  income
associated  with invested cash. Gel Tech, LLC did not have any debt  outstanding
during this period and consequently did not record any interest expense.

                                       14
<PAGE>
CHEWING GUM OPERATIONS

     Certain  information  is set forth  below for our  chewing  gum  operations
expressed in dollars and as a percentage of net sales for the periods indicated:

                                                YEAR ENDED DECEMBER 31
                                      ----------------------------------------
                                             1999                   1998
                                      ------------------    ------------------
Net sales                             $ 5,903,093    100%   $ 5,356,855    100%
Cost of sales                           4,907,995     82      4,470,652     83
                                      -----------   ----    -----------   ----
Gross profit                            1,085,098     18        886,203     17
Operating expenses                      2,258,684     38      6,134,688    115
Research and development                  422,555      7        667,067     12
                                      -----------   ----    -----------   ----
Income (loss) from operations          (1,596,141)   (27)    (5,915,552)  (110)
Interest and other income                  73,136      1        127,947      2
Interest expense                        1,311,792     22        473,811      9
                                      -----------   ----    -----------   ----
Net income (loss)                     $(2,834,797)   (48)%  $(6,261,416)  (117)%
                                      ===========   ====    ===========   ====

     NET SALES. Net sales increased to  approximately  $6.0 million for the year
ended December 31, 1999, or 12% above the prior year. This increase reflects the
addition of several new  customers  and/or  products in mid to late 1998.  Among
these were Ranir DCP,  BreathAsure,  Heritage Consumer Products'  AcuTrim(R) gum
and Pharmagreen Ltd. Sales in the prior year largely reflect sales of Cigarest's
smoking  cessation  gum,  Herbalife's  diet and  energy  gums,  Aspergum(R)  and
Chooz(R), and initial deliveries of BreathAsure Dental Gum(TM).

     COST OF SALES.  Cost of sales increased to approximately  $4.9 million,  or
approximately $440,000 above the prior year, due to the higher level of sales.

     GROSS PROFIT.  Gross profit  increased to $1.1 million  reflecting both the
higher level of sales and improvement in our manufacturing processes.

     OPERATING  EXPENSES.  Operating  expenses  declined by  approximately  $3.9
million  from the 1998  level to $2.3  million  in  1999.  The  amount  for 1998
includes  unusual  one-time  charges of  $1,478,750  to  reflect  the cost of an
extension  of options  to a former  officer,  $732,000  for  options  granted to
another individual,  and $618,230 representing a severance compensation expense.
Exclusive  of these  charges,  operating  expenses in 1998 were  $3,335,042,  or
approximately $1.06 million greater than the 1999 level. The reduction in normal
recurring  operating  expenses in 1999 was  principally  due to a  reduction  in
advertising,  trade show and travel  expense  of  $522,000  due to the change in
corporate  strategy  in 1998,  lower legal  expenses  of  $157,000  due to costs
associated with the management  restructuring  in early 1998, and the allocation
of administrative and warehousing expenses to Gel Tech, LLC of $167,000 in 1999.

     INTEREST AND OTHER  INCOME.  Interest and other income  decreased  due to a
lower cash balance maintained during 1999.

                                       15
<PAGE>
     INTEREST  EXPENSE.  Interest  expense  increased  from 1998 by  $837,981 to
approximately $1.3 million primarily due to interest charges associated with the
Citadel  financing  in June 1999.  Included  in these  amounts  were a number of
non-cash  interest charges  associated with this financing.  The notes issued in
connection with this  financing,  together with the Company's  outstanding  term
loan facility, were redeemed in full in the first quarter of 2000.

     INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST.  Net
loss decreased by  approximately  $3.4 million  primarily due to the substantial
decrease in operating expenses offset in part by higher interest expense.

LIQUIDITY AND CAPITAL RESOURCES

     Gum Tech's working  capital  declined from  approximately  $12.5 million at
December 31, 1999 to  approximately  $5.6  million at December 31, 2000.  During
this period,  Gum Tech experienced a decrease in cash from operating  activities
of  approximately  $5.2  million,  due  primarily to a net loss of $10.8 million
(before  minority  interest in subsidiary)  and an increase in inventory of $1.1
million.  This  decrease  in cash for 2000 was offset by a decrease  in accounts
receivable of $3.5 million and an increase in accounts payable of $1.7 million.

     Cash flows from investing  activities consumed  approximately $2.0 million,
largely due to expenditures  and deposits for additional  equipment.  Cash flows
from financing activities provided  approximately $5.1 million primarily through
the  issuance of common  stock upon the exercise of options and warrants of $3.8
million, a capital contribution of $2.0 million from the minority partner in Gel
Tech, LLC and a $1.0 million borrowing from a bank. These were offset in part by
$800,000 of cash used to repay the term loan with Textron and  $814,000  used to
pay a dividend to the holders of interests in Gel Tech, LLC.

     During the first  quarter of 2000,  Gum Tech  redeemed the remainder of the
Citadel  financing  by issuing a total of  193,447  shares of common  stock.  In
January 2000, Gel Tech LLC entered into a $1.0 million revolving credit facility
with a commercial bank and has borrowed $1.0 million under that facility.

     For additional information regarding certain recent developments that could
materially  affect Gum  Tech's  liquidity  and  capital  resources,  see Item 1.
Business-Recent Developments.

DISCLOSURE CONCERNING FORWARD-LOOKING STATEMENTS

     This  report   includes   statements   that   constitute   "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995 (the "Reform Act") and Gum Tech claims the protection of the safe-harbor
for   forward-looking   statements   contained   in  the   Reform   Act.   These
forward-looking   statements  are  often   characterized  by  the  terms  "may,"
"believes,"   "projects,"   "expects,"  or  "anticipates"  and  do  not  reflect
historical facts. Specific  forward-looking  statements contained in this report
under the  captions  "Business"  and  "Management's  Discussion  and Analysis of
Financial  Condition and Results of  Operations"  include but are not limited to
(i) the expectation  that the proposed sale of assets to Wrigley will enable Gum
Tech to improve its financial performance in the long-term; (ii) the belief that
Gum Tech will be better  positioned  following  the  proposed  sale of assets to
Wrigley to pursue other  potential  opportunities  in the market for  innovative
nutrient  and drug  delivery  systems;  (iii)  the  expectation  that the use of
proceeds  from the proposed  sale of assets to Wrigley to increase the marketing
of the Zicam line of products will result in significant growth and revenue from
sales of those  products;  (iv) the belief that the joint  venture  with Swedish
Match will lead to  development  of a  non-tobacco  nicotine  product  that will
substantially increase revenue to Gum Tech; and (v) the Company's belief that it
will be able to satisfy  all the  closing  conditions  to the  proposed  sale of
assets to Wrigley on a timely basis.

                                       16
<PAGE>
     Forward-looking statements involve risks, uncertainties,  and other factors
that may cause actual  results,  performance,  or  achievements to be materially
different from those expressed or implied by such forward-looking statements.

     Factors  that could  cause  actual  results to differ  materially  from Gum
Tech's expectations include, but are not limited to, the following:  (i) failure
to obtain  stockholder  approval or to satisfy  other  closing  conditions  with
respect to the proposed asset sale;  (ii) less than  anticipated  demand for our
chewing gum or nasal gel products, including Zicam Cold Remedy and Zicam Allergy
Relief;  (iii) lack of market  acceptance  for or  uncertainties  concerning the
efficacy of the Zicam line of products; (iv) fluctuations in seasonal demand for
the Zicam line of products;  (v)  difficulties in increasing  production to meet
unexpectedly  high  demand in the short  term;  (vi) a decrease  in the level of
reorders from existing gum customers;  (vii) financial difficulties  encountered
by one or more of our  principal  customers;  (vii)  difficulties  in  obtaining
additional capital for marketing,  research and development, and other expenses;
(ix) the  possibility  of material  charges may be incurred as a result of prior
activities;  (x)  unavailability of third-party  material products at reasonable
prices;  (xi) inventory  obsolescence due to shifts in market demand;  and (xii)
material litigation involving patent and contractual claims, product liabilities
and consumer issues.

IF THE  PROPOSED  SALE OF ASSETS  TO  WRIGLEY  IS  COMPLETED,  WE MAY  ENCOUNTER
DIFFICULTIES IN CONTINUING OUR OPERATIONS

     Assuming  the  proposed  sale to Wrigley is  completed  as  expected in the
second  quarter  of 2001,  there  can be no  guarantee  that  Gum Tech  will not
encounter difficulties in continuing its remaining operations. If completed, the
sale of assets will require Gum Tech to replace or continue without its research
and development personnel and capabilities,  including the full-time services of
Gary Kehoe,  sublease or obtain a new lease for its principal executive offices,
and determine how to most effectively  apply the proceeds received from the sale
of  assets.  There  can be no  assurance  that Gum Tech  will be  successful  in
addressing these issues.

WE INCURRED SIGNIFICANT LOSSES IN PREVIOUS YEARS

     We began operations in February 1991 and have a limited  operating  history
upon which potential  investors may evaluate our performance.  Further,  we have
recorded losses in each of the last several years and our future  operations may
not be profitable.  The likelihood of our 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, the significant
change in strategy in early 1998,  that  significant  change in operations  that
will result from the proposed asset sale, and the  development  and marketing of
Zicam Cold Remedy and Zicam Allergy Relief, both relatively new products.

IF ZICAM COLD  REMEDY AND ZICAM  ALLERGY  RELIEF DO NOT GAIN  MARKET  WIDESPREAD
ACCEPTANCE, OUR ANTICIPATED SALES AND RESULTS OF OPERATIONS WILL SUFFER

     Although  studies have indicated  that Zicam Cold Remedy can  significantly
reduce the duration and severity of the common cold,  there is no guarantee that
the  product  will  achieve   widespread   acceptance  by  the  market.  If  any
unanticipated problem arises concerning the efficacy of Zicam Cold Remedy or the
product  fails to achieve  widespread  market  acceptance  for any  reason,  our
prospects  for our future  operating  results  would be adversely  affected.  In
addition,  Zicam Allergy Relief has only been recently introduced and as yet has

                                       17
<PAGE>
not  achieved the success  enjoyed by Zicam Cold  Remedy.  There is no assurance
that demand for these products will continue to grow.

WE MAY BE UNABLE TO MEET DEMAND FOR OUR NEW PRODUCTS

     To the extent  Zicam Cold Remedy or Zicam  Allergy  Relief or any other new
product  we  introduce  achieves  widespread  market  acceptance  and  generates
significant  demand,  we  may  be  unable  to  produce  and  deliver  sufficient
quantities of the product to meet our customers'  demands on a timely basis.  If
so, we could lose  opportunities  to sell larger  quantities  of the product and
damage  relationships with distributors whose orders could not be timely filled.
This problem, if encountered,  could be particularly damaging if we are not able
to meet  customer  demand  during the cold and allergy  seasons,  when we expect
demand for sales of the two Zicam products to peak.

UNANTICIPATED PROBLEMS ASSOCIATED WITH PRODUCT DEVELOPMENT COULD DELAY OR HINDER
INTRODUCTION OF NEW PRODUCTS

     We may  experience  unanticipated  difficulties  in developing new products
that could  delay or  prevent  the  introduction  of those  products.  We may be
dependent in the near future upon chewing gum products that are currently  being
developed.  If we are unable to develop new chewing gum products or new products
in the  innovative  nutrient and drug delivery  system market on a timely basis,
our business,  operating  results,  and financial  condition could be materially
adversely affected.

OUR RELIANCE  UPON A FEW GUM  CUSTOMERS  HAS  NEGATIVELY  IMPACTED OUR FINANCIAL
RESULTS

     The shift in our chewing gum  strategy in early 1998 to a focus on contract
manufacturing has made our chewing gum operations dependent for sales and future
growth on a few  customers.  In 1999,  we achieved some  significant  success in
building gum sales  through the addition of and  increased  sales to  Herbalife,
BreathAsure,  Ranir, Heritage Consumer Products and PharmaGreen.  However, sales
to these customers  dropped  significantly  in 2000,  primarily due to financial
difficulties  experienced  by  several  of these  customers.  Further,  Heritage
Consumer  Products  ceased  operations  in late 2000 and  BreathAsure  filed for
reorganization  under the  bankruptcy  statutes.  While sales to new  customers,
including the successor  companies to Heritage and BreathAsure,  may offset this
decline,  Gum Tech will continue to be dependent on the financial  resources and
marketing  capabilities  of third  parties.  Further,  we are at risk for  their
non-payment  or late  payment for amounts  owed to us. While we intend to add to
this portfolio of customers to reduce the risk of  non-performance by any single
customer,  and to focus on the  addition of larger,  more  established  consumer
companies, we have not yet been successful in that effort.

OUR  INABILITY  TO PROVIDE  SCIENTIFIC  PROOF FOR PRODUCT  CLAIMS MAY  ADVERSELY
AFFECT OUR SALES

     The  marketing  of  certain  of our nasal  gel and  chewing  gum  products,
including both Zicam  products,  involves  claims that these products reduce the
duration of the common cold and relieve allergy symptoms, assist in weight loss,
promote  dental  hygiene,  among other claims.  Under FDA and FTC rules,  we are
required  to  obtain  scientific  data to  support  any  health  claims  we make
concerning  our  products.  Although we have not provided nor been  requested to
provide  any  scientific  data to the FDA in  support  of claims  regarding  our
products, we have obtained scientific data for all of our products. There can be
no assurance that the scientific  data we have obtained in support of our claims
will be deemed  acceptable to the FDA or FTC,  should either agency  request any
such  data  in the  future.  If  the  FDA or the  FTC  requests  any  supporting
information,  and we are unable to provide support that is acceptable to the FDA
or the FTC,  either  agency could force us to stop making the claims in question
or restrict us from selling the affected products.

                                       18
<PAGE>
FDA AND  OTHER  GOVERNMENT  REGULATION  MAY  RESTRICT  OUR  ABILITY  TO SELL OUR
PRODUCTS

     We are  subject to various  federal,  state and local  laws  affecting  our
business.  Our nasal gel and chewing gum products 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.  If we do not comply with these regulations,  the FDA could
force us to stop selling the  affected  products or incur  substantial  costs in
adopting measures to maintain compliance with these regulations.

     Our  advertising   claims   regarding  our  products  are  subject  to  the
jurisdiction  of the FTC as well as the FDA.  In both cases we are  required  to
obtain  scientific  data to support any advertising or labeling health claims we
make concerning our products, although no pre-clearance or filing is required to
be made with either agency. If we are unable to provide the required support for
such  claims,  the FTC may stop us from making such claims or require us to stop
selling the related product.

WE MAY BE UNABLE TO SUCCESSFULLY EXPAND OUR OPERATIONS

     We intend to continue expanding our manufacturing and marketing operations,
subject to completion of the proposed sale of assets to Wrigley.  Expansion will
place substantial strains on our management and our operational, accounting, and
information systems.  Successful management of growth will require us to improve
our  financial  controls,   operating  procedures,  and  management  information
systems, and to train, motivate, and manage our employees.

     In  addition,  to the extent  that  actual  demand for our  products in the
future is less than  anticipated,  we may incur higher than  necessary  costs in
preparing  for an  anticipated  growth  in sales  that does not  materialize  or
materializes more slowly than expected.

     Failure to manage growth  effectively  would have a material adverse effect
on the  results  of our  operations  and our  ability to  execute  our  business
strategy.

WE MAY BE UNABLE TO PREVENT OTHERS FROM DEVELOPING SIMILAR PRODUCTS

     We routinely  seek trademark and patent  protection  from the United States
Patent Office and from similar agencies in foreign countries for our chewing gum
brands and the Zicam line of products. There can be no assurance that we will be
able to  successfully  defend any  trademarks,  trade  names or patents  against
claims  from or use by  competitors  or that  trademark,  trade  name or  patent
applications will be approved by the USPO or any similar foreign agency.

     We consider  some of our  chewing  gum  formulations  and  processes  to be
proprietary in nature and rely 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 our proprietary information or that our
competitors  will  not  independently   develop  chewing  gum  formulations  and
processes that are substantially equivalent or superior to our own.

THE LARGE NUMBER OF SHARES  ELIGIBLE FOR  IMMEDIATE AND FUTURE SALES MAY DEPRESS
THE PRICE OF OUR STOCK

     Sales of  substantial  amounts  of common  stock in the open  market or the
availability  of a large number of  additional  shares for sale could  adversely
affect  the  market  price  for  the  common  stock.  Substantially  all  of our
outstanding  shares of common stock, as well as the shares underlying vested but
as yet unexercised warrants and options,  have either been registered for public
sale or may be sold  under  Rule  144  promulgated  under  the  Securities  Act.

                                       19
<PAGE>
Therefore,  all of  these  shares  may be  immediately  sold by the  holders.  A
substantial increase in the volume of trading in our stock may depress the price
of our common stock.

THE PRICE OF OUR STOCK MAY CONTINUE TO BE VOLATILE

     The  market  price of our common  stock has been  highly  volatile  and may
continue to be volatile in the future.  Factors such as our operating results or
public announcements may cause the market price of our stock to decline quickly.
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 our control.

WE MAY INCUR SIGNIFICANT COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS

     We are subject to  significant  liability  should use or consumption of our
products  cause injury,  illness or death.  Although we carry product  liability
insurance,  there can be no  assurance  that our  insurance  will be adequate to
protect us against  product  liability  claims or that  insurance  coverage will
continue to be available on reasonable terms.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     None

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Independent  Auditors' Report and Consolidated  Financial Statements of
Gum Tech,  including the Notes to those  statements,  are set forth on pages F-1
through F-24.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Gum  Tech has had no  disagreements  with its  independent  accountants  in
regard  to  accounting  and  financial   disclosure  and  has  not  changed  its
independent accountants during the two most recent fiscal years.

                                       20
<PAGE>
                                    PART III

ITEM 10. INFORMATION CONCERNING DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS

     The following sets forth certain information with respect to Directors and
executive officers of the Company.

          NAME              AGE      POSITION WITH COMPANY AND TENURE
          ----              ---      --------------------------------

     Gary S. Kehoe          42       President since 1998 and Chief Operating
                                     Officer and Director since 1995

     William D. Boone       52       Director since 1998

     Edward E. Faber        68       Chairman of the Board since April 2001
                                     and Director since 2000

     William J. Hemelt      47       Executive Vice President, Operations
                                     since April 2001 and Chief Financial
                                     Officer, Secretary and Treasurer since 1998

     Edward J. Walsh        69       Director since 2000

     William A. Yuan        39       Director since 1998

     Michael A. Zeher       54       Director since 2000

     Gary S. Kehoe joined Gum Tech in 1995 as Chief Operating Officer and a
Director. He was responsible for construction and start-up of our manufacturing
facility and research and development of gum products. In February 1998, the
Board of Directors elected Mr. Kehoe as our President. Prior to joining Gum
Tech, Mr. Kehoe was employed by Planters/LifeSavers, a division of Nabisco Food
Group, in various capacities, including Senior Food Technologist, where he was
responsible for functional and nutriceutical products in the confectionery
division. He developed or co-developed several new technologies, processes, and
products involving CareFree, Bubble Yum, Fruit Stripe, and Beech Nut chewing
gums and is listed as inventor or co-inventor on 22 U.S. patents filed by
Nabisco and Gum Tech. If Wm Wrigley Jr. Company acquires the Company's gum
operations as contemplated by the Asset Purchase Agreement filed as an exhibit
to the Company's Form 10-K filed on April 2, 2001, it is contemplated that Mr.
Kehoe will resign as an officer and Director of the Company and that he will
become an employee of Wrigley.

     William D. Boone was elected to the Board of Directors in February 1998,
and served as a manufacturing consultant to Gum Tech in early 1998. Mr. Boone
has 30 years experience in small business management and sales growth, including
co-founding and co-managing Trade Printers, Inc., a Phoenix-based wholesale
printing manufacturer, which he subsequently sold.

     Edward E. Faber has been a Director since September 2000 and is currently
Chairman of the Board of Directors. Mr. Faber currently serves as Vice Chairman
for Cotelligent Inc. (a NYSE company) and on the boards of EmployeeServices.com,
Phoenix Leasing Inc., and OBCTV.com. Previously, Mr. Faber was President and
Chief Executive Officer of SuperCuts, Inc., and the founding President and
subsequently Chairman and Chief Executive Officer of Computerland Corporation.
Mr. Faber also was Vice Chairman and Chief Executive Officer of Dataphaz,
Computerland's largest franchise operator.

                                       21
<PAGE>
     William J. Hemelt joined Gum Tech in June 1998 as Chief Financial Officer,
Treasurer, and Secretary and assumed additional responsibilities as Executive
Vice President, Operations in April 2001. From 1980 to 1997, Mr. Hemelt held a
variety of financial positions with Arizona Public Service Company, Arizona's
largest utility, including 6 years as Treasurer and 4 years as Controller.

     Mr. Walsh has been a Director since September 2000 and currently is the
President of Sparta Group Lt., a business consulting firm located in Arizona,
and serves on several boards, including Guest Supply Inc., Nortrust of Arizona
Holding Corporation, and the WD-40 Company. Mr. Walsh previously served as
President and Chief Executive Officer of Dial Corporation and as President and
Chief Executive Officer of Armour International.

     William A. Yuan has been a Director since 1998. Mr. Yuan is President and
Chief Executive Officer of Reliance Management, LLC. From 1985 until 1996, Mr.
Yuan was employed by Merrill Lynch and Salomon Smith Barney in various
positions.

     Mr. Zeher has been a Director since September 2000 and currently is
President and Chief Executive Officer of Lander Company, Inc. - Ranir
Corporation, responsible for total worldwide operations and various business
segments. Previously, Mr. Zeher was Vice President, Business Development for
Johnson & Johnson and responsible for North American Consumer Sector business.
He also held various sales and marketing positions with Johnson & Johnson over
his 20-year employment with that company.

     Bruce A. Jorgenson, M.D. and W. Brown Russell resigned from the Board of
Directors effective February 17, 2000 and September 30, 2000, respectively.
Kenneth Waters, a consultant to the Company, was elected to the Board of
Directors on November 1, 2000 and resigned from the Board on April 10, 2001.

     All Directors' terms are on an annual basis.

MEETINGS OF THE BOARD OF DIRECTORS

     During the fiscal year ended December 31, 2000, the Board of Directors held
16 meetings, either in person or by consent resolution. All Directors attended
or participated in at least 75% of those meetings and the total number of
meetings held by all committees of the Board on which they served, except for
Mr. Zeher who attended 60% of such meetings.

AUDIT COMMITTEE

     The Audit Committee of the Board at the end of 2000 consisted of Edward
Walsh (Chairman), Edward Faber and Ken Waters. The functions of the Audit
Committee are to receive reports with respect to loss contingencies, the public
disclosure or financial statement notation of which may be legally required;
annually review and examine those matters that relate to a financial and
performance audit of our employee plans; recommend to our Board of Directors the
selection, retention, and termination of our independent accountants; review the
professional services, proposed fees and independence of such accountants; and
provide for the periodic review and examination of management performance in
selected aspects of corporate responsibility. The Audit Committee did not meet
in 2000.

                                       22
<PAGE>
COMPENSATION COMMITTEE

     The Compensation Committee of the Board at the end of 2000 consisted of
Edward Faber (Chairman), William Boone and William Yuan. The functions of the
Compensation Committee are to review annually the performance of the President
and of the other principal officers whose compensation is subject to the review
and recommendation by the Compensation Committee. Additionally, the Compensation
Committee reviews compensation of outside directors for service on the Board and
for service on committees of the Board, and the level and extent of applicable
benefits we provide with respect to insurance, health and medical coverage,
stock options and other benefits. The Compensation Committee held one meeting
during fiscal 2000.

DIRECTOR COMPENSATION

     The Company's non-employee Directors receive $3,000 per quarter for service
on the Board and $1,000 per quarter for service on any of the Company's
committees or as Company representative on any board or management committee of
the Company's joint ventures. In addition, the Chairman of the Board or any
committee receives an additional $500 per quarter for service in that capacity.
Each Board member was granted 10,000 options upon his election to the Board.

     Mr. Faber was elected Chairman of the Board in April 2001. He will receive
$5,000 per month as compensation for consulting services in a variety of
operational areas and was granted 10,000 options upon his election as Chairman.
This compensation is in lieu of the standard board compensation outlined above.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 (the "Exhange Act")
requires Gum Tech's officers and directors, and persons who own more than ten
percent of a registered class of Gum Tech's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). These officers, directors and shareholders are required by
SEC regulation to furnish Gum Tech with copies of all Section 16(a) forms they
file.

     Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for such persons, Gum Tech believes that during the fiscal year ended
December 31, 2000, all filing requirements applicable to its officers,
directors, and greater than ten percent beneficial owners were complied with.

ITEM 11. EXECUTIVE COMPENSATION

     The following table discloses, for the years ended December 31, 1998, 1999,
and 2000, certain compensation paid to the Company's Chief Executive Officer,
and to each other executive officer whose total compensation in 2000 exceeded
$100,000. No other executive officer of the Company at December 31, 2000 earned
more than $100,000 in annual compensation during the fiscal year ended December
31, 2000.

                                       23
<PAGE>
                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                     LONG TERM COMPENSATION
                                                                    -------------------------
                                        ANNUAL COMPENSATION                  AWARDS              PAYOUTS
                                ----------------------------------  -------------------------    -------
                                                                    RESTRICTED    SECURITIES
NAME AND PRINCIPAL                                    OTHER ANNUAL    STOCK       UNDERLYING      LTIP        ALL OTHER
POSITION                YEAR      SALARY    BONUS     COMPENSATION   AWARD(S)     OPTIONS/SARS   PAYOUTS   COMPENSATION(1)
--------                ----      ------    -----     ------------   --------     ------------   -------   ---------------
<S>                     <C>     <C>        <C>            <C>         <C>           <C>           <C>         <C>
Gary S. Kehoe           2000    $150,000   $     0        $  0          0             9,000       $  0        $  4,500
President and Chief     1999    $132,292   $50,000        $  0          0            80,000       $  0        $  3,965
 Operating Officer      1998    $ 95,000   $30,000(2)     $  0          0           188,000(3)    $  0        $  2,847

William J. Hemelt       2000    $100,000   $     0        $  0          0             9,000       $  0        $  3,000
Executive Vice          1999    $100,000   $     0        $  0          0            24,000       $  0        $  3,000
President and Chief     1998    $ 58,333   $     0        $  0          0            50,000       $  0        $  1,750
Financial Officer

W. Brown Russell        2000    $100,000   $     0        $  0          0             9,000       $  0        $215,962(4)
Former Chairman of      1999    $ 96,667   $     0        $  0          0            60,000       $  0        $  2,821
the Board               1998    $ 44,000   $     0        $  0          0            70,000       $  0        $      0
</TABLE>

----------
(1)  Includes matching contributions under our SRA/IRA defined contribution
     program.
(2)  Includes $10,000 that was accrued in 1998 but paid in 1999.
(3)  Represents options originally granted in prior years that were repriced in
     April 1998 to $5.625 per share, equal to the fair market value on the date
     of repricing. In accordance with SEC rules, these options are reported as
     options granted during the fiscal year 1998 as a result of the repricing.
(4)  Includes the principal amount of and accrued interest on a loan to Mr.
     Russell that was forgiven in conjunction with his severance and consulting
     agreements.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

     The following table provides information on option grants during the year
ended December 31, 2000 to the named executive officers:

                                 PERCENT OF
                   NUMBER OF    TOTAL OPTIONS/
                   SECURITIES    SARS GRANTED
                   UNDERLYING   TO EMPLOYEES   EXERCISE               GRANT DATE
                  OPTIONS/SARS   IN FISCAL      PRICE      EXPIRATION   PRESENT
NAME                GRANTED       YEAR (1)    (PER SHARE)     DATE      VALUE(1)
----                -------       --------    -----------     ----      --------
Gary S. Kehoe        9,000          17%         $13.125      7/27/03    $50,148
William J. Hemelt    9,000          17%         $13.125      7/27/03    $50,148
W. Brown Russell     9,000          17%         $13.125      7/27/03    $50,148

----------
(1)  The grant date present values per option share were derived using the
     Black-Scholes option pricing model in accordance with SEC rules and
     regulations and are not intended to forecast future appreciation of our
     stock price. The options granted on July 27, 2000 had a grant date present
     value of $5.572 per option. The Black-Scholes model was used with the
     following assumptions: volatility of 69.96% based on a historical weekly
     average; dividend yield of 0%; risk-free interest of 6.31% based on a U.S.
     Treasury rate of three years; and a two year option life.

                                       24
<PAGE>
         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES

     The following table provides information on the value realized by the
exercise of options by the named executive officers during 2000 and the value of
the named executive officer's unexercised options at December 31, 2000.

<TABLE>
<CAPTION>
                                               NUMBER OF SECURITIES
                                              UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED
                     SHARES                      OPTIONS/SARS AT            IN-THE-MONEY OPTIONS/
                    ACQUIRED                     FISCAL YEAR-END           SARS AT FISCAL YEAR-END
                       ON         VALUE    ---------------------------   ---------------------------
     NAME           EXERCISE    REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
     ----           --------    --------   -----------   -------------   -----------   -------------
<S>                 <C>         <C>          <C>            <C>            <C>             <C>
Gary S. Kehoe        88,000     $698,696      66,500        22,500         $     0         $  0
William J. Hemelt     3,000     $ 54,291      54,000         8,000         $36,250         $  0
W. Brown Russell          0     $      0     116,500        12,500         $45,000         $  0
</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The following table sets forth information, as of April 24, 2001, with
respect to the number of shares of Gum Tech's Common Stock beneficially owned by
the named executive officers, by individual directors, by all directors and
officers as a group, and by persons known by Gum Tech to beneficially own more
than 5% its outstanding Common Stock. The address of all persons (unless
otherwise noted in the footnotes below) is in care of Gum Tech at 246 E. Watkins
Street, Phoenix, Arizona 85004. The indicated percentages are based upon the
number of shares of Common Stock outstanding as of April 24, 2001, plus, where
applicable, the number of shares that the indicated person or group had a right
to acquire within 60 days of that date.

NAME OF BENEFICIAL                     NUMBER OF            PERCENT OF COMMON
OWNER AND ADDRESS                       SHARES                 STOCK OWNED
-----------------                       ------                 -----------
Gary S. Kehoe(1)                        242,900                    2.6%
William D. Boone(2)                      85,200                    0.9%
Edward E. Faber (3)                      15,000                    0.2%
William J. Hemelt (4)                    78,000                    0.8%
W. Brown Russell, III(5)                 69,000                    0.7%
Edward J. Walsh(6)                        5,000                    0.1%
William A. Yuan(7)                       20,071                    0.2%
Michael A. Zeher(8)                       5,000                    0.1%
All named individuals
 as a group (8 persons)                 520,171                    5.5%

----------
(1)  Includes options to purchase 70,000 shares at $11.75, 10,000 shares at
     $12.5625 and 9,000 shares at $13.3125.
(2)  Includes options to purchase 10,000 shares at $12.5625 and 5,000 shares at
     $13.3125.
(3)  Includes options to purchase 5,000 shares at $14.3125 and 10,000 shares at
     $9.00.
(4)  Includes options to purchase 29,000 shares at $5.50, 16,000 shares at
     $12.5625 and 9,000 shares at $13.3125.
(5)  Includes options to purchase 50,000 shares at $11.75 per share, 9,000
     shares at $13.3125 and 10,000 shares at $12.5625.
(6)  Includes options to purchase 5,000 shares at $14.3125.
(7)  Includes options to purchase 10,000 shares at $12.5625 and 10,000 shares at
     $13.3125.
(8)  Includes options to purchase 5,000 shares at $14.3125.

                                       25
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In June 2000, Gum Tech entered into a five year consulting agreement with
Mr. Kehoe, its President and Chief Operating Officer and a member of its Board
of Directors. The agreement is designed primarily to ensure continuation of Mr.
Kehoe's research and development services, as required by Gum Tech's agreement
with Swedish Match, in the event of his termination of employment with Gum Tech.
As principal consideration for his services under the agreement, which is
effective only upon his termination of employment from Gum Tech, Mr. Kehoe will
be entitled to receive $12,500 per month and five percent (5%) of the net income
realized by Gum Tech from the joint venture with Swedish Match.

     Separately, in December 2000, the Company agreed to loan Mr. Kehoe
$150,000. The loan is to be repaid with 10% interest on December 20, 2001. The
Company intends to forgive this loan upon the completion of the transaction with
Wrigley.

     In connection with Brown Russell's resignation from the Board in September
2000, The Company entered into severance and consulting agreements with Mr.
Russell, who previously held the positions of Chairman of the Board and Director
of Investor Relations and Legal. Pursuant to these agreements, Mr. Russell
continues as a consultant to the Company through the end of September 2001 at a
monthly rate of $8,333. In addition, the Company agreed to forgive repayment of
an outstanding loan of $200,000 and accrued interest that was due in September
2000.

     In July 2000, the Company awarded an additional 5,000 options to Mr. Yuan,
a member of the Board, as compensation for investment banking consulting
services.

     Mr. Waters, a consultant to the Company since April 1998, was elected to
the Board in November 2000 and resigned from the Board on April 10, 2001. Mr.
Waters was paid $10,000 per month during the period he served on the Board. This
compensation was in lieu of any compensation that would have been due him for
service on the Board. Mr. Waters was also granted options in conjunction with
his consulting and board service.

                                       26
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K

EXHIBITS

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

         3.01                 Certificate   of   Incorporation   and  Amendments
                              thereto of Gum Tech(1)

         3.02                 Bylaws of Gum Tech(1)

         10.2                 Consulting Agreement with Gary S. Kehoe (8)

         10.01                1995 Stock Option Plan(1)

         10.02                Amendment to Stock Option Plan(1)

         10.03                Employment Contract with Gary S. Kehoe(1)

         10.04                Employment Contract with William J. Hemelt (2)

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

         10.06                Lease  Agreement  between Gum Tech and Beardsley &
                              1-17 L.L.C., for the lease of  packaging/warehouse
                              facility (3)

                                       27
<PAGE>
         Exhibit No.                    Title
         -----------                    -----

         10.07                Form of Manufacturing Agreement (4)

         10.08                Operating Agreement of Gel Tech, LLC (5)

         10.09                Credit Agreement between Gel Tech LLC and
                              Imperial Bank (6)

         10.10                Securities Purchase Agreement with Citadel
                              Investment Group (7)

         10.11                Shareholders' Agreement between the Registrant and
                              Swedish Match AB (8)

         10.12                Asset Purchase Agreement between Gum Tech and
                              Wm. Wrigley Jr. Company (9)

         10.13                First Amendment to the Operating Agreement of
                              Gel Tech, LLC +

         23                   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 Report on Form 10-QSB for the
     quarter ending September 30, 1998, file number 000-27646.

(3)  Incorporated by reference to the Registrant's Report on Form 10-KSB for the
     year ending December 31, 1997, file number 000-27646.

(4)  Incorporated by reference to the Registrant's 10-KSB filed March 31, 1999.

(5)  Incorporated by reference to the Registrant's Report on Form 10-QSB for the
     quarter ending March 31, 1999, file number 000-27646.

(6)  Incorporated by reference to the Registrant's Report on Form 10-Q for the
     quarter ending March 31, 2000, file number 000-27646.

(7)  Incorporated by reference to the Registrant's Form 8-K filed June 9, 1999.

(8)  Incorporated by reference to the  Registrant's  Report on Form 10-Q for the
     quarter ended June 30, 2000, file number 000-27646.

(9)  Certain Confidential  Information  contained in this Exhibit was omitted by
     means of redacting a portion of the text and replacing it with an asterisk.
     This Exhibit has been filed separately with the Secretary of the Securities
     and Exchange  Commission  without the redaction  pursuant to a Confidential
     Treatment Request under Rule 24b-2 of the Securities Exchange Act of 1934.

* Filed herewith
+ Previously filed with the Company's 10K on April 2, 2001.

REPORTS ON FORM 8-K

     None.

                                       28
<PAGE>
                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly  caused  this  Report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized, in Phoenix, Arizona, on June 13, 2001.


                                    GUM TECH INTERNATIONAL, INC.


                                    By: /s/ Gary S. Kehoe
                                        ---------------------------------------
                                        Gary S. Kehoe
                                        President and Chief Operating Officer


     Pursuant to the  requirements  of the  Securities  Act of 1933, as amended,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dated indicated:


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

/s/ William D. Boone        Director                               June 13, 2001
------------------------
William D. Boone


/s/ Edward E. Faber         Chairman of the Board of Directors     June 13, 2001
------------------------
Edward E. Faber


/s/ William J. Hemelt       Chief Financial Officer                June 13, 2001
------------------------    (Principal Financial Officer),
William J. Hemelt           Principal Accounting Officer
                            Treasurer, Executive Vice
                            President, Operations


/s/ Edward J. Walsh         Director                               June 13, 2001
------------------------
Edward J. Walsh


/s/ William A. Yuan         Director                               June 13, 2001
------------------------
William A. Yuan


/s/ Michael A. Zeher        Director                               June 13, 2001
------------------------
Michael A. Zeher

                                       29
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Financial Statements                                                        Page
--------------------                                                        ----

Independent Auditors' Report                                                 F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999                 F-3

Consolidated Statements of Operations for the
  years ended December 31, 2000, 1999 and 1998                               F-5

Consolidated Statements of Changes in Stockholders' Equity
  for the years ended December 31, 2000, 1999 and 1998                       F-6

Consolidated Statements of Cash Flows for the years ended
  December 31, 2000, 1999 and 1998                                           F-8

Notes To Consolidated Financial Statements                                   F-9

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
Gum Tech International, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of Gum  Tech
International,  Inc.  and  Subsidiary  as of December  31, 2000 and 1999 and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for the years  ended  December  31,  2000,  1999 and 1998.  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 after the restatement
described in Note 2 present  fairly,  in all material  respects,  the  financial
position of Gum Tech International,  Inc. and Subsidiary as of December 31, 2000
and 1999 and the results of their  operations and their cash flows for the years
ended December 31, 2000,  1999 and 1998 in conformity  with  generally  accepted
accounting principles.


                                      /s/ Angell & Deering
                                      Certified Public Accountants

Denver, Colorado
February 10, 2001, except for
Note 2 and Note 16 as to which
the date is June 11, 2001

                                       F-2
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999


                                     ASSETS
                                     ------

                                                     2000              1999
                                                 ------------      ------------
Current Assets:
  Cash and cash equivalents                      $  3,485,204      $  5,595,075
  Restricted cash                                   1,187,114           270,878
  Accounts receivable:
   Trade, net of allowance for doubtful
    accounts of $306,835 and $50,482                4,198,731         8,197,180
   Employees                                              911            56,237
  Inventories                                       3,056,782         1,966,819
  Prepaid expenses                                    119,715           155,281
  Note receivable                                     150,000                --
                                                 ------------      ------------

     Total Current Assets                          12,198,457        16,241,470
                                                 ------------      ------------
Property and Equipment, at cost:
  Machinery and equipment                           5,255,308         4,455,694
  Office furniture and equipment                      350,076           295,577
  Leasehold improvements                              553,288           383,854
                                                 ------------      ------------
                                                    6,158,672         5,135,125
  Less accumulated depreciation                    (2,166,093)       (1,724,276)
                                                 ------------      ------------

     Net Property and Equipment                     3,992,579         3,410,849
                                                 ------------      ------------
Other Assets:
  Deposits                                            789,868           214,936
  Intangible assets, net of accumulated
   amortization of $709,403 and $548,744                   --           160,659
                                                 ------------      ------------

     Total Other Assets                               789,868           375,595
                                                 ------------      ------------

     Total Assets                                $ 16,980,904      $ 20,027,914
                                                 ============      ============

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

                                       F-3
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

<TABLE>
<CAPTION>
                                                            2000
                                                         As Adjusted
                                                          (Note 2)             1999
                                                        ------------       ------------
<S>                                                    <C>               <C>
Current Liabilities:
  Accounts payable and accrued expenses                 $  3,780,264       $  2,078,358
  Customer deposits                                           64,862             10,500
  Sales returns and allowances                               855,760          1,202,100
  Notes payable                                            1,000,000                 --
  Current portion of long-term debt                            2,956            420,043
  Deferred revenue                                           936,141                 --
                                                        ------------       ------------

     Total Current Liabilities                             6,639,983          3,711,001
                                                        ------------       ------------
Long-Term Debt, net of current portion above:
  Financial institutions and other                                --          2,646,897
  Obligations under capital leases                             2,956             14,105
  Less current portion above                                  (2,956)          (420,043)
                                                        ------------       ------------

     Total Long-Term Debt                                         --          2,240,959
                                                        ------------       ------------

Minority interest in consolidated affiliate                 (107,547)         1,374,117
                                                        ------------       ------------

Commitments and Contingencies                                     --                 --

Stockholders' Equity:
  Preferred stock: no par value, 1,000,000 shares
   authorized:
    Series A preferred stock, $1,000 stated value,
    2,000 shares authorized, -0- and 1,000 shares
    issued and outstanding                                        --          1,000,000
  Common stock: no par value, 20,000,000 shares
   authorized, 9,047,047 and 8,320,705 shares
   issued and outstanding                                 30,459,362         23,687,579
  Additional paid in capital                               3,675,699          3,551,766
  Accumulated deficit                                    (23,686,593)       (15,537,508)
                                                        ------------       ------------

     Total Stockholders' Equity                           10,448,468         12,701,837
                                                        ------------       ------------

     Total Liabilities and Stockholders' Equity         $ 16,980,904       $ 20,027,914
                                                        ============       ============
</TABLE>

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

                                       F-4
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                               2000
                                                            As Adjusted
                                                             (Note 2)            1999              1998
                                                           ------------       -----------       -----------
<S>                                                        <C>                <C>                <C>
Net sales                                                  $ 13,377,889       $15,586,540       $ 5,356,855

Cost of sales                                                 7,151,903         7,611,504         4,470,652
                                                           ------------       -----------       -----------

       Gross Profit                                           6,225,986         7,975,036           886,203

Operating expenses                                           16,753,166         5,521,864         6,134,688
Research and development                                        782,383           664,448           667,067
                                                           ------------       -----------       -----------

       Income (Loss) From Operations                        (11,309,563)        1,788,724        (5,915,552)
                                                           ------------       -----------       -----------
Other Income (Expense):
  Interest and other income                                     274,225           123,564           127,947
  Other income                                                  698,138                --                --
  Interest expense                                             (458,460)       (1,311,792)         (473,811)
                                                           ------------       -----------       -----------

       Total Other Income (Expense)                             513,903        (1,188,228)         (345,864)
                                                           ------------       -----------       -----------
Income (Loss) Before Provision For
  Income Taxes and Minority Interest                        (10,795,660)          600,496        (6,261,416)

Provision for income taxes                                        8,585                --                --
Minority interest in earnings of
  consolidated affiliate                                      2,667,165        (1,374,117)               --
                                                           ------------       -----------       -----------

Net Income (Loss)                                            (8,137,080)         (773,621)       (6,261,416)

Preferred stock dividends                                        12,005           238,466                --
                                                           ------------       -----------       -----------
Net Income (Loss) Applicable to
Common Shareholders                                        $ (8,149,085)      $(1,012,087)      $(6,261,416)
                                                           ============       ===========       ===========

Net Income (Loss) Per Share of Common Stock:
  Basic                                                    $       (.91)      $      (.14)      $      (.97)
  Diluted                                                  $       (.91)      $      (.14)      $      (.97)

Weighted Average Number of Common Shares Outstanding:
  Basic                                                       8,906,635         7,412,959         6,427,815
  Diluted                                                     8,906,635         7,412,959         6,427,815
</TABLE>

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

                                       F-5
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                            Series A
                                                         Preferred Stock            Common Stock          Additional
                                                      --------------------   ------------------------      Paid In     Accumulated
                                                      Shares      Amount       Shares        Amount        Capital       Deficit
                                                      ------   -----------   ---------    -----------    -----------   ------------
<S>                                                   <C>      <C>           <C>          <C>            <C>           <C>
Balance at December 31, 1997                              --   $        --   5,856,460    $12,088,150    $   665,790   $ (8,080,968)

Issuance of common stock upon exercise of stock
 options and warrants                                     --            --     785,962      2,032,897             --             --

Conversion of convertible notes payable into
 common stock                                             --            --     215,577      1,023,990             --             --

Compensation from extension and issuance of stock
 options                                                  --            --          --             --      2,249,362             --

Net loss                                                  --            --          --             --             --     (6,261,416)
                                                      ------   -----------   ---------    -----------    -----------   ------------

Balance at December 31, 1998                              --            --   6,857,999     15,145,037      2,915,152    (14,342,384)

Issuance of common stock upon exercise of stock
 options and warrants                                     --            --     890,800      3,672,044             --             --

Conversion of convertible notes payable into common
 stock                                                    --            --     317,046      1,505,972             --             --

Issuance of Series A preferred stock (net of
 costs of $519,011)                                    2,000     2,000,000          --             --       (519,011)            --

Issuance of common stock for repayment of senior
 notes, including prepayment penalty                      --            --     163,704      2,200,000             --             --

Issuance of common stock for redemption of Series
 A preferred stock, including prepayment penalty      (1,000)   (1,000,000)     86,163      1,100,000             --             --

Issuance of common stock for payment of interest
 on senior notes                                          --            --       4,993         64,526             --             --

Compensation from issuance of stock options               --            --          --             --         64,275             --

Issuance of warrants in connection with financing         --            --          --             --      1,091,350             --

Payment of Series A preferred stock dividends             --            --          --             --             --       (238,466)

Dividend distribution of subsidiary                       --            --          --             --             --       (183,037)

Net loss                                                  --            --          --             --             --       (773,621)
                                                      ------   -----------   ---------    -----------    -----------   ------------

Balance at December 31, 1999                           1,000     1,000,000   8,320,705     23,687,579      3,551,766    (15,537,508)
</TABLE>
                     The accompanying notes are an integral
                part of these consolidated financial statements.

                                       F-6
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                           Series A                                                    Accumulated
                                                        Preferred Stock             Common Stock        Additional       Deficit
                                                     ---------------------    -----------------------     Paid In      As Adjusted
                                                     Shares      Amount        Shares        Amount       Capital        (Note 2)
                                                     ------    -----------    ---------   -----------   -----------    ------------
<S>                                                  <C>       <C>            <C>         <C>           <C>            <C>
Issuance of common stock upon exercise of stock
 options and warrants                                    --    $        --      532,895   $ 3,771,783   $        --    $         --

Issuance of common stock for repayment of senior
 notes                                                   --             --      145,395     2,000,000            --              --

Issuance of common stock for redemption of Series
 A preferred stock                                   (1,000)    (1,000,000)      48,052     1,000,000            --              --

Compensation from issuance of stock stock options        --             --           --            --       123,933              --

Payment of Series A preferred stock dividends            --             --           --            --            --         (12,005)

Net loss                                                 --             --           --            --            --      (8,137,080)
                                                     ------    -----------    ---------   -----------   -----------    ------------

Balance at December 31, 2000                             --    $        --    9,047,047   $30,459,362   $ 3,675,699    $(23,686,593)
                                                     ======    ===========    =========   ===========   ===========    ============
</TABLE>

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

                                       F-7
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                  2000
                                                                               As Adjusted
                                                                                (Note 2)          1999            1998
                                                                               -----------     -----------     -----------
<S>                                                                            <C>             <C>             <C>
Cash Flows From Operating Activities:
 Net income (loss)                                                             $(8,137,080)    $  (773,621)    $(6,261,416)
 Adjustments to reconcile net income (loss) to net cash
  (used) by operating activities:
    Depreciation                                                                   460,702         430,223         304,277
    Amortization                                                                   160,659         392,218         108,816
    Amortization of discount on notes payable                                      212,500         387,500              --
    Provision for bad debts                                                        448,645          45,000          34,613
    (Gain) loss on disposal of assets                                                8,017           1,544          (2,699)
    Compensation from forgiveness of note receivable                               209,753              --         114,012
    Compensation from extension and issuance of stock options                      123,933          64,275       2,249,362
    Common stock issued for payment of interest                                         --         264,526              --
    Minority interest in earnings of consolidated affiliate                     (2,667,165)      1,374,117              --
    Changes in assets and liabilities:
     Restricted cash                                                              (916,236)             --              --
     Accounts receivable                                                         3,549,804      (6,779,541)       (415,018)
     Employee receivables                                                           55,326         (56,237)         61,054
     Inventories                                                                (1,089,963)        (70,658)       (862,779)
     Prepaid expenses and other                                                     35,566        (345,159)         92,254
     Interest receivable                                                                --              --          60,164
     Deposits and other                                                                 --              --           7,291
     Accounts payable and accrued expenses                                       1,701,906         726,842         551,058
     Customer deposits                                                              54,362         (24,263)         19,763
     Sales returns and allowances                                                 (346,340)      1,167,100          35,000
     Deferred revenue                                                              936,141              --              --
                                                                               -----------     -----------     -----------
          Net Cash (Used) By Operating Activities                               (5,199,470)     (3,196,134)     (3,904,248)
                                                                               -----------     -----------     -----------
Cash Flows From Investing Activities:
 Capital expenditures                                                           (1,050,449)       (294,389)       (990,557)
 Proceeds from disposal of equipment                                                    --              --          16,122
 Increase in notes receivable                                                     (359,753)             --              --
 Receipt of principal on notes receivable                                               --              --         250,000
 Deposits and other                                                               (574,932)         64,195        (139,358)
                                                                               -----------     -----------     -----------
          Net Cash (Used) By Investing Activities                               (1,985,134)       (230,194)       (863,793)
                                                                               -----------     -----------     -----------
Cash Flows From Financing Activities:
 Proceeds from borrowing                                                         1,000,000       4,000,000              --
 Principal payments on notes payable                                              (870,546)       (381,307)       (343,184)
 Issuance of common stock                                                        3,771,783       3,672,054       2,032,897
 Issuance of preferred stock                                                            --       2,000,000              --
 Offering costs incurred                                                                --        (155,231)             --
 Debt issuance costs incurred                                                           --        (310,462)        (11,733)
 Dividend distribution of subsidiary                                              (814,499)       (183,037)             --
 Capital contribution of minority interest                                       2,000,000              --              --
 Dividends paid on preferred stock                                                 (12,005)       (138,466)             --
                                                                               -----------     -----------     -----------
          Net Cash Provided By Financing Activities                              5,074,733       8,503,551       1,677,980
                                                                               -----------     -----------     -----------

          Net Increase (Decrease) in Cash and Cash Equivalents                  (2,109,871)      5,077,223      (3,090,061)

          Cash and Cash Equivalents at Beginning of Year                         5,595,075         517,852       3,607,913
                                                                               -----------     -----------     -----------
          Cash and Cash Equivalents at End of Year                             $ 3,485,204     $ 5,595,075     $   517,852
                                                                               ===========     ===========     ===========
Supplemental Disclosure of Cash Flow Information:
 Cash paid during the year for:
  Interest                                                                     $    64,985     $   509,997     $   392,693
  Income taxes                                                                       8,735             150             150

Supplemental Disclosure of Non-cash Investing and Financing Activities:
  Conversion of convertible notes payable into common stock                    $        --     $ 1,505,972     $ 1,023,990
  Issuance of warrants in connection with financing                                     --       1,091,340              --
  Issuance of common stock to repay senior notes and redeem preferred stock      3,000,000       3,000,000              --
  Issuance of common stock for payment of dividends                                     --         100,000              --
</TABLE>
                     The accompanying notes are an integral
                part of these consolidated financial statements.

                                       F-8
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED 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  for  branded  and  private  label  customers,  as well as products
    marketed  under the  Company's  brand.  The Company  currently  targets four
    market segments:  oral care,  smoking  cessation,  dietary  supplement,  and
    over-the-counter (OTC) drug.

    The Company also is developing,  marketing and selling homeopathic  remedies
    utilizing a nasal gel technology through a majority owned subsidiary.

    PRINCIPLES OF CONSOLIDATION

    The consolidated  financial  statements  include the accounts of the Company
    and  its  majority  owned  subsidiary,  Gel  Tech,  L.L.C.  All  significant
    intercompany accounts and transactions have been eliminated.

    INVENTORIES

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

    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                              5-30
    Office furniture and equipment                       5
    Leasehold improvements                               5-10

    Depreciation  of property and equipment  charged to operations was $460,702,
    $430,223 and $304,277 for the years ended December 31, 2000,  1999 and 1998,
    respectively.

    INTANGIBLE ASSETS

    Debt issuance costs are being amortized using the straight-line  method over
    the term of the notes.

    REVENUE RECOGNITION

    The Company  recognizes  revenue  from  product  sales upon  shipment to the
    customer, net of an allowance for sales returns.

    STOCK-BASED COMPENSATION

    The Company adopted Statement of Financial  Accounting Standard ("SFAS") No.
    123, "Accounting for Stock-Based Compensation". The Company will continue to
    measure compensation expense for its stock-based employee compensation plans
    using  the  intrinsic  value  method  prescribed  by  APB  Opinion  No.  25,
    "Accounting  for  Stock  Issued  to  Employees".  See  Note 9 for pro  forma
    disclosures of net income and earnings per share as if the fair  value-based
    method prescribed by SFAS No. 123 had been applied in measuring compensation
    expense.

                                       F-9
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    LONG-LIVED ASSETS

    When facts and circumstances indicate that the cost of long-lived assets may
    be impaired,  an evaluation of the  recoverability is performed by comparing
    the carrying  value of the assets to the projected  future cash flows.  Upon
    indication  that the carrying  value of such assets may not be  recoverable,
    the  Company  recognizes  an  impairment  loss by a charge  against  current
    operations.

    SHIPPING AND HANDLING COSTS

    The Company includes shipping and handling costs in cost of sales.

    INCOME TAXES

    Deferred  income taxes are provided for  temporary  differences  between the
    financial  reporting and tax basis of assets and  liabilities  using enacted
    tax laws and  rates for the  years  when the  differences  are  expected  to
    reverse.

    ADVERTISING

    The Company advertises primarily through television,  radio and print media.
    The Company's policy is to expense advertising costs,  including  production
    costs,  as incurred.  Advertising  expense was  $10,008,274,  $1,343,492 and
    $421,363 for the years ended December 31, 2000, 1999 and 1998, respectively.

    BARTER CREDITS

    The Company records sales under barter transactions at the carrying value of
    the inventory  after reducing the inventory to its net realizable  value for
    any  impairment.  At the time barter credits are utilized by the Company for
    advertising,  packaging,  travel  expenses and other purchases an expense is
    recognized based on the carrying value of the barter credits plus cash paid.
    The Company  recorded  the sales under its barter  transactions  in 1996 and
    1997 at a zero value and, therefore, when the barter credits are used by the
    Company it  recognizes  an expense only for the cash  expended for the items
    purchased.

    NET INCOME (LOSS) PER SHARE OF COMMON STOCK

    The Company adopted SFAS No. 128, "Earnings Per Share",  which specifies the
    method of computation,  presentation  and disclosure for earnings per share.
    SFAS No. 128 requires the  presentation  of two earnings per share  amounts,
    basic and diluted.

    Basic  earnings per share is calculated  using the average  number of common
    shares  outstanding.  Diluted earnings per share is computed on the basis of
    the average number of common shares  outstanding plus the dilutive effect of
    outstanding stock options using the "treasury stock" method.

    The basic and diluted  earnings per share are the same since the Company had
    a net loss in 2000,  1999 and 1998 and the  inclusion  of stock  options and
    other  incremental  shares  would be  antidilutive.  Consequently,  options,
    warrants and other  incremental  shares to purchase  945,310,  1,540,168 and
    1,554,968  shares of  common  stock at  December  31,  2000,  1999 and 1998,
    respectively  were excluded  from the  computation  of diluted  earnings per
    share.

                                      F-10
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    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 at the
    date of purchase 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.

    RECENTLY ISSUED ACCOUNTING STANDARDS

    The  Securities  and  Exchange  Commission  (SEC)  issued  Staff  Accounting
    Bulletin (SAB) 101, Revenue Recognition in Financial Statements, in December
    1999.  The SAB  summarizes  certain  of the SEC  staff's  views in  applying
    generally accepted accounting principles to revenue recognition in financial
    statements.  In June  2000,  the SEC  issued  SAB  101B,  which  delays  the
    implementation date of SAB 101 until no later than the fourth fiscal quarter
    of fiscal years beginning after December 15, 1999. The Company believes that
    its revenue  recognition  practices are in conformity with the guidelines in
    SAB 101, as revised.

    In March 2000, the Financial  Accounting  Standards Board (FASB) issued FASB
    Interpretation (FIN) 44, Accounting for Certain Transactions involving Stock
    Compensation,  which clarifies the application of APB 25 for certain issues.
    The interpretation is effective July 1, 2000, except for the provisions that
    relate to  modifications  that  directly or  indirectly  reduce the exercise
    price of an award and the  definition  of an employee,  which are  effective
    after December 15, 1998. FIN 44 provides  clarification  of certain  issues,
    such  as  the  determination  of  who  is  an  employee,  the  criteria  for
    determining  whether  a  plan  qualifies  as a  non-compensatory  plan,  the
    accounting consequence of various modifications to the terms of a previously
    fixed  stock  option or award and the  accounting  for an  exchange of stock
    compensation awards in a business combination. The adoption of FIN 44 had no
    impact on the Company's financial statements.

    In  September  2000,  the  Emerging  Issues  Task Force  ("EITF")  reached a
    consensus regarding Issue 00-10,  "Accounting for Shipping and Handling Fees
    and Costs,"  which  requires  any  shipping  and  handling  costs  billed to
    customers in a sale  transaction  to be classified  as revenue.  The Company
    adopted Issue 00-10 in the fourth quarter of 2000. The Company  restated its
    1998 and 1999  financial  statements to conform to the  financial  statement
    presentation in 2000.

    RECLASSIFICATIONS

    Certain  prior  period  amounts have been  reclassified  to conform with the
    current period presentation.

2.  RESTATEMENT OF FINANCIAL INFORMATION

    The  Company  has  restated  its  financial  statements  for the year  ended
    December  31,  2000 to  amortize a payment of  $1,625,000  received  for the
    extension  of a contract  over the three month term of the  extension  (Note
    16). The $1,625,000 was originally recorded as income in 2000.

    In the opinion of management,  all material adjustments necessary to correct
    the financial statements have been recorded. The impact of these adjustments
    on the  Company's  financial  results as  originally  reported is summarized
    below:

                                                 Year Ended Decemeber 31, 2000
                                                 -----------------------------
                                                  As Reported     As Restated
                                                  -----------     -----------
    Other income                                 $  1,634,279    $    698,138
    Net income (loss)                              (7,200,939)     (8,137,080)
    Net income (loss) per share                          (.81)           (.91)
    Accumulated deficit at end of year            (22,750,452)    (23,686,593)

                                      F-11
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.  RESTRICTED CASH

    Cash of $1,187,114 and $270,878 at December 31, 2000 and 1999, respectively,
    was held as collateral by a bank for letters of credit issued to a vendor of
    the Company's advertising campaign, a lender and the lessor of the Company's
    manufacturing and warehouse facilities.

4.  INVENTORIES

    Inventories consist of the following:

                                                       2000             1999
                                                    ----------       ----------
    Raw materials and packaging                     $1,816,922       $1,140,713
    Work in process                                    159,516          541,886
    Finished goods                                   1,080,344          284,220
                                                    ----------       ----------
       Total                                        $3,056,782       $1,966,819
                                                    ==========       ==========

5. NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                           2000              1999
                                                                           ----              ----
<S>                                                                     <C>               <C>
     BANK
     $1,000,000  line of credit  due in 2001 with  interest  at 3%
     above prime (or 9.5% at December 31, 2000), collateralized by
     Gel Tech, L.L.C.'s accounts receivable,  inventory,  property
     and equipment and intangible assets.  Advances under the line
     of credit are  limited to 50% of Gel Tech,  L.L.C's  eligible
     accounts  receivable  plus cash on deposit with the bank. The
     loan also  contains  various  financial  covenants  regarding
     liquidity  percentages and Gel Tech,  L.L.C.  must maintain a
     profit on a  quarterly  basis.  The bank has  waived  the net
     income  covenant of Gel Tech,  L.L.C. on a quarterly basis in
     2000.
                                                                        $1,000,000        $       --
                                                                        ==========        ==========

6.  LONG-TERM DEBT

     Long-term debt consists of the following:

                                                                           2000              1999
                                                                           ----              ----
     FINANCIAL INSTITUTIONS AND OTHER
     9.73% installment note due in 2001 with monthly principal and
     interest payments of $39,550, collateralized by machinery and
     equipment and a $250,000 letter of credit.
                                                                        $       --        $  859,397
     OBLIGATIONS UNDER CAPITAL LEASES
     9.4% installment notes due in 2001 with monthly principal and
     interest payments of $1,000, collateralized by equipment.               2,956            14,105
</TABLE>

                                      F-12
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>                                                         <C>               <C>
6.  LONG-TERM DEBT (CONTINUED)

    SENIOR NOTES
    8% senior notes due in 2001 with interest payable  quarterly.
    One half of the notes  must be repaid  within one year with a
    10% prepayment  penalty,  collateralized by substantially all
    assets of the  Company  and the notes may be repaid in shares
    of the Company's  common stock.  Any  repayments of the notes
    must be accompanied by a redemption of the Series A preferred
    stock on a prorata  basis of two  thirds  notes and one third
    preferred  stock (Note 8). The notes are subject to financial
    covenants  regarding net revenue,  EBITDA,  and cash balances
    with all covenants  calculated  on the  Company's  operations
    excluding its majority owned  subsidiary.  The Company was in
    default on the EBITDA  covenant at  December  31,  1999.  The
    Company  repaid the entire amount of the notes in January and
    February 2000 through the issuance of common stock.                         --         2,000,000

    Less debt discount                                                          --          (212,500)
                                                                        ----------        ----------

    Net Senior Notes                                                            --         1,787,500
                                                                        ----------        ----------

    Total Long-Term Debt                                                     2,956         2,661,002

    Less current portion of long-term debt                                  (2,956)         (420,043)
                                                                        ----------        ----------

    Long-Term Debt                                                      $       --        $2,240,959
                                                                        ==========        ==========
</TABLE>

    Installments  due on  debt  principal,  including  the  capital  leases,  at
    December 31, 2000 are as follows:

             Year Ending
             December 31,
             ------------
                 2001                  $2,956
                                       ------

                 Total                 $2,956
                                       ======

                                      F-13
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.  INCOME TAXES

    The components of the provision for income taxes are as follows:

                                                   2000        1999        1998
                                                   ----        ----        ----
    Current:
    Federal                                        $ --        $ --        $ --
    State                                            --          --          --
                                                   ----        ----        ----
      Total                                          --          --          --
                                                   ----        ----        ----
    Deferred:
    Federal                                          --          --          --
    State                                            --          --          --
                                                   ----        ----        ----
      Total                                          --          --          --
                                                   ----        ----        ----

    Total Provision For Income Taxes               $ --        $ --        $ --
                                                   ====        ====        ====

    The provision  (benefit) for income taxes  reconciles to the amount computed
    by  applying  the  federal  statutory  rate to income  before the  provision
    (benefit) for income taxes as follows:

                                                    2000       1999       1998
                                                    ----       ----       ----

    Federal statutory rate                           (34)%      (34)%      (34)%
    State income taxes, net of federal benefits       (5)        (5)        (5)
    Valuation allowance                               39         39         39
                                                    ----       ----       ----

    Total                                             --%        --%        --%
                                                    ====       ====       ====

    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%.

<TABLE>
<CAPTION>
                                                         2000             1999              1998
                                                         ----             ----              ----
<S>                                                  <C>               <C>             <C>
    Income taxes at the federal statutory rate       $(2,763,688)      $(263,031)      $(2,128,881)
    State income taxes, net of federal benefits         (406,425)        (38,681)         (330,603)
    Nondeductible expenses                                 4,465           3,836             8,864
    Valuation allowance                                3,165,648         297,876         2,450,620
                                                     -----------       ---------       -----------

    Total                                            $        --       $      --       $        --
                                                     ===========       =========       ===========
</TABLE>
                                      F-14
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    Significant  components of deferred income taxes as of December 31, 2000 and
    1999 are as follows:

                                                      2000             1999
                                                  ------------     ------------
    Net operating loss carryforward               $ 15,917,800     $ 10,521,400
    Reserve for bad debts                              116,900           10,700
    Reserve for obsolete inventory                       4,800               --
                                                  ------------     ------------

    Total deferred tax asset                        16,039,500       10,532,100
                                                  ------------     ------------

    Depreciation                                      (580,600)        (496,400)
    Stock option compensation                       (5,983,600)      (3,577,600)
    Other                                               (5,800)          (5,700)
                                                  ------------     ------------
    Total deferred tax liability                    (6,570,000)      (4,079,700)
    Less valuation allowance                        (9,469,500)      (6,452,400)
                                                  ------------     ------------

    Net Deferred Tax Asset                        $         --     $         --
                                                  ============     ============

    The Company  has  assessed  its past  earnings  history  and  trends,  sales
    backlog,  budgeted  sales,  and expiration  dates of  carryforwards  and has
    determined  that it is more likely than not that no deferred tax assets will
    be realized. The valuation allowance of $9,469,500 is maintained on deferred
    tax assets which the Company has not  determined  to be more likely than not
    realizable  at this time.  The net  change in the  valuation  allowance  for
    deferred tax assets was an increase of $3,017,100. The Company will continue
    to review  this  valuation  on a  quarterly  basis and make  adjustments  as
    appropriate.

    At December 31, 2000,  the Company had federal and state net operating  loss
    carryforwards of approximately $38,000,000. Such carryforwards expire in the
    years  2011  through  2020  and 2001  through  2005 for  federal  and  state
    purposes, respectively.

8.  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 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.

    In June 1999, the Company  designated a new class of preferred stock "Series
    A  Preferred  Stock" and the number of shares  constituting  such  series is
    2,000 shares with no par value.  The new series was authorized in connection
    with a Securities  Purchase  Agreement  for the sale of $4,000,000 of senior
    notes (Note 6) and  $2,000,000 of Series A preferred  stock.  Each preferred
    share  shall  bear  dividends  at a rate of 14% per  year,  which  shall  be
    cumulative,   and  are  payable  on  a  quarterly  basis.  Upon  the  second
    anniversary  of the issuance date (June 2, 2001) each  preferred  share will
    automatically  convert  into shares of common  stock by dividing  the stated
    value of the preferred  shares ($1,000) by 80% of the average of the closing
    bid price of the Company's common stock for the 20 days preceding such date.
    Until all of the preferred  shares have been  converted into common stock or
    redeemed,  the  Company  may not  declare or pay any cash  dividends  on its
    common  stock  without  the  written  consent  of at least two thirds of the

                                      F-15
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8. PREFERRED STOCK (CONTINUED)

    holders of the preferred  shares.  One half of the preferred  shares must be
    redeemed within one year with a 10% prepayment  penalty.  Any redemptions of
    the  preferred  shares must be  accompanied  by a repayment of the Company's
    senior notes on a prorata basis of one third  preferred stock and two thirds
    senior notes.  Any  redemptions of the preferred stock prior to June 2, 2001
    are based on 95% of the average of the  closing  bid price of the  Company's
    common  stock for the 20 days prior to the date of  redemption.  The Company
    may redeem the preferred  stock in cash,  solely at its option.  The Company
    redeemed  all of the  outstanding  preferred  shares in January and February
    2000 through the issuance of common stock.

9.  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 2,000,000 shares of common stock have been reserved for
    issuance under the Plan.

    Options  under the Company's  plan 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 until January 1, 2005.

    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.

    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 years ended  December 31, 1998,  1999 and 2000.  The
    outstanding agreements expire from February 2001 to September 2004.

                                                   Number of    Weighted Average
                                                     Shares      Exercise Price
                                                     ------      --------------
    Options outstanding at December 31, 1997       1,684,000         $ 6.18
      Granted                                        912,000           5.79
      Exercised                                     (600,250)          2.78
      Cancelled                                   (1,298,750)          7.65
                                                  ----------         ------

    Options outstanding at December 31, 1998         697,000           5.86
     Granted                                         315,000          11.90
     Exercised                                      (333,500)          5.62
     Cancelled                                       (14,000)          5.63
                                                  ----------         ------

                                      F-16
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.  STOCK OPTIONS AND WARRANTS (CONTINUED)

    STOCK OPTION PLAN (CONTINUED)

    Options outstanding at December 31, 1999             664,500        $ 8.85
     Granted                                             120,000         13.40
     Exercised                                          (148,000)         5.63
     Cancelled                                           (45,000)        12.00
                                                        --------        ------

    Options outstanding at December 31, 2000             591,500        $10.34
                                                        ========        ======

    On  April  24,  1998,  the  Board  of  Directors  approved  a  repricing  of
    substantially all outstanding  employee stock options granted under the Plan
    with an exercise price of greater than $5.625 per share to $5.625 per share.
    The Board of Directors  would not typically  consider  reducing the exercise
    price of previously  granted options.  However,  these options were repriced
    due to the occurrence of certain events beyond the reasonable control of the
    employees of the Company which  significantly  reduced the  incentive  these
    options were  intended to create.  The fair market value of the common stock
    was $5.625 on the date of the repricing.  Options to purchase  approximately
    588,000 shares were affected by this repricing.

    OTHER STOCK OPTIONS

    The  Company  has  granted   non-qualified  stock  options  to  consultants,
    distributors and other individuals.  The outstanding  agreements expire from
    June 2001 to September 2004.

    The following  table contains  information on all of the Company's  non-plan
    stock options for the years ended December 31, 1998, 1999 and 2000.

                                                   Number of    Weighted Average
                                                     Shares      Exercise Price
                                                     ------      --------------
    Options outstanding at December 31, 1997        280,000          $ 2.85
      Granted                                        25,000           11.44
      Exercised                                    (180,000)           1.80
      Cancelled                                          --              --
                                                   --------          ------

    Options outstanding at December 31, 1998        125,000            6.09
      Granted                                       215,000            9.63
      Exercised                                    (100,000)           4.75
      Cancelled                                          --              --
                                                   --------          ------

    Options outstanding at December 31, 1999        240,000            9.82
      Granted                                        20,000           14.31
      Exercised                                     (77,314)           9.91
      Cancelled                                      (5,900)           9.61
                                                   --------          ------

    Options outstanding at December 31, 2000        176,786          $10.12
                                                   ========          ======

    PROFORMA DISCLOSURES

    The Company has adopted SFAS No. 123. In accordance  with the  provisions of
    SFAS No. 123, the Company applies APB Opinion No. 25,  "Accounting for Stock
    Issued to  Employees,"  and related  interpretations  in accounting  for its

                                      F-17
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.  STOCK OPTIONS AND WARRANTS (CONTINUED)

    PROFORMA DISCLOSURES (CONTINUED)

    plans  and does  not  recognize  compensation  expense  for its  stock-based
    compensation  plans other than for options granted to non-employees.  If the
    Company had elected to recognize  compensation  expense  based upon the fair
    value at the grant date for awards  under  these plans  consistent  with the
    methodology  prescribed  by SFAS No.  123,  the  Company's  net  income  and
    earnings per share would be reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                2000              1999              1998
                                                             -----------       -----------       -----------
<S>                                                          <C>               <C>               <C>
     Net income (loss) applicable to common shareholders:
       As reported                                           $(8,149,085)      $(1,012,087)      $(6,261,416)
       Pro forma                                             $(9,661,085)      $(1,654,447)      $(7,299,820)

     Net income (loss) per share of common stock:
       As reported                                           $      (.91)      $      (.14)      $      (.97)
       Pro forma                                             $     (1.08)      $      (.22)      $     (1.14)
</TABLE>

    These pro forma  amounts  may not be  representative  of future  disclosures
    since the estimated fair value of stock options is amortized to expense over
    the vesting  period and  additional  options may be granted in future years.
    The fair value for these  options was  estimated  at the date of grant using
    the  Black-Scholes  option pricing model with the following  assumptions for
    the years ended December 31, 2000, 1999 and 1998.

                                          2000            1999          1998
                                        -------         -------       -------
    Risk-free interest rate                6.19%           5.90%         5.45%
    Expected life                       2.16 years      3 years       2 years
    Expected volatility                   69.96%           63.1%        61.82%
    Expected dividend yield                   0%              0%            0%

    The Black-Scholes option valuation model was developed for use in estimating
    the fair value of traded options which have no vesting  restrictions and are
    fully transferable.  In addition,  option valuation models require the input
    of  highly  subjective   assumptions  including  the  expected  stock  price
    volatility.    Because   the   Company's   employee   stock   options   have
    characteristics  significantly  different from those of traded options,  and
    because changes in subjective  input  assumptions can materially  affect the
    fair value estimates,  in management's  opinion,  the existing models do not
    necessarily  provide a  reliable  single  measure  of the fair  value of its
    employee stock-based compensation plans.

    The weighted  average fair value price of options  granted was $5.72,  $5.56
    and $1.56 in 2000, 1999 and 1998, respectively.

    The following table summarizes  information about  stock-based  compensation
    plans outstanding at December 31, 2000:

                                      F-18
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.  STOCK OPTIONS AND WARRANTS (CONTINUED)

    Options Outstanding and Exercisable by Price Range as of December 31, 2000:

<TABLE>
<CAPTION>
                              Options Outstanding                  Options Exercisable
                    ---------------------------------------     ------------------------
                                     Weighted
                                     Average       Weighted                     Weighted
      Range of                      Remaining      Average                      Average
      Exercise         Number       Contractual    Exercise        Number       Exercise
       Prices       Outstanding     Life-Years      Price       Exercisable      Price
       ------       -----------     ----------      -----       -----------      -----
<S>                   <C>              <C>          <C>           <C>            <C>
    $ 5.50- 6.88      181,500           .22         $ 5.90        181,500        $ 5.90
    $11.72-16.13      410,000          2.46         $12.31        312,000        $12.30
    ------------      -------          ----         ------        -------        ------

    $ 5.50-16.13      591,500          1.78         $10.34        493,500        $ 9.95
    ============      =======          ====         ======        =======        ======
</TABLE>

    COMPENSATION EXPENSE

    The  Company  recorded   compensation  expense  of  $123,933,   $64,275  and
    $2,249,362  for  the  years  ended   December  31,  2000,   1999  and  1998,
    respectively  for the value of certain options granted to  non-employees  of
    the  Company  and for the  extension  of  options  previously  granted to an
    Officer  and  Director  of the  Company.  The  valuation  of the options and
    warrants  granted  to  employees  is based  on the  difference  between  the
    exercise  price and the market value of the stock on the  measurement  date.
    The valuation of the options granted to non-employees is estimated using the
    Black-Scholes option pricing model.

    UNDERWRITER'S WARRANTS

    In connection with the Company's Initial Public Offering in 1996 the Company
    issued to the  Underwriter,  warrants to purchase up to 40,000  units of the
    Company's  securities  for $24.75 per unit.  Each warrant is  exercisable to
    purchase  three  shares of  common  stock and one  redeemable  common  stock
    purchase  warrant which is exercisable to purchase one share of common stock
    at $7.50 per  share at  anytime  until  April 24,  2001.  The  Underwriter's
    warrant is exercisable at anytime until April 24, 2001.

    In 2000, 1999 and 1998,  11,526,  16,825,  and 1,428,  respectively,  of the
    Underwriter's  warrants  were  exercised  and  7,391 are  outstanding  as of
    December 31, 2000.

    FINANCING WARRANTS

    In connection with the Company's  Securities Purchase Agreement for the sale
    of senior notes and Series A preferred stock, the Company issued warrants to
    the lenders.  The Company  issued a total of 300,000  common stock  purchase
    warrants. Each warrant is exercisable to purchase one share of the Company's
    common  stock at $12.44  per share at anytime  until June 1, 2002.  In 2000,
    212,540  warrants were exercised and 87,460  warrants are  outstanding as of
    December 31, 2000.

    The Company also issued a total of 60,000 common stock purchase  warrants as
    a finders fee in connection with the financing.  Each warrant is exercisable
    to purchase one share of the Company's  common  stock,  30,000 at $11.70 per
    share  through  June 1, 2002 and 30,000 at $15.00 per share  through June 1,
    2004. All of the warrants are outstanding at December 31, 2000.

                                      F-19
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10. COMMITMENTS AND CONTINGENCIES

    LEASES

    The Company leases its office and packaging  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 office
    and packaging  facilities contains a five year renewal option. The following
    is a schedule of future  minimum  lease  payments at December 31, 2000 under
    the Company's  capital  leases  (together  with the present value of minimum
    lease  payments)  and  operating  leases  that  have  initial  or  remaining
    noncancellable lease terms in excess of one year:

      Year Ending                          Capital
      December 31,                         Leases      Facilities        Total
      ------------                         ------      ----------        -----
       2001                                $ 3,001     $  287,310     $  290,311
       2002                                     --        303,426        303,426
       2003                                     --        252,383        252,383
       2004                                     --        145,188        145,188
       2005                                     --        133,089        133,089
                                           -------     ----------     ----------

     Total Minimum Lease Payments            3,001     $1,121,396     $1,124,397
                                                       ==========     ==========

     Less amount representing interest         (45)
                                           -------
     Present Value of Net Minimum
     Lease Payments                        $ 2,956
                                           =======

    Rental expense charged to operations was $330,134, $323,173 and $193,152 for
    the years ended December 31, 2000, 1999 and 1998, respectively.

    Leased equipment under capital leases as of December 31, 2000 and 1999 is as
    follows:

                                                           2000          1999
                                                         --------      --------
     Equipment                                           $ 47,727      $ 47,727
     Less accumulated depreciation                        (45,341)      (35,795)
                                                         --------      --------

     Net Property and Equipment Under Capital Leases     $  2,386      $ 11,932
                                                         ========      ========

    MINORITY INTEREST

    The Company has an option to purchase the 40% minority  interest in Gel Tech
    at the Company's sole discretion.  If the Company exercises its option,  the
    Company shall pay cash, issue shares of the Company's common stock, or pay a
    combination  of cash and the  Company's  common  stock in  exchange  for the
    minority interest in Gel Tech. The fair market value of the consideration to
    be issued shall be equal to the fair market  value of the minority  interest
    in Gel Tech at the time the Company exercises its option.

    LITIGATION

    On November 9, 1999, The Quigley Corporation  ("Quigley")  commenced a civil
    action  against  the  Company in the United  States  District  Court for the
    Eastern District of Pennsylvania.  The complaint alleges that Zicam(TM) Cold
    Remedy  infringes  on a patent  licensed to  Quigley.  The  complaint  seeks
    compensatory damages and injunctive relief.

                                      F-20
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10. COMMITMENTS AND CONTINGENCIES (CONTINUED)

    LITIGATION (CONTINUED)

    In a ruling on April 20,  2000,  the judge in the case  denied a motion  for
    preliminary  injunctive  relief.  In an amended  order on May 12, 2000,  the
    judge  certified  three  issues of law for  immediate  appeal to The  United
    States  Court of Appeals for the Federal  circuit.  An appeal by the Company
    based on those three issues is currently  pending  before the United  States
    Court of  Appeals  for the  Federal  circuit.  The  Federal  District  Court
    restored the case to its active docket even though the proceedings  relating
    to that petition are still pending in the Court of Appeals.  If found liable
    at trial, the Company may be enjoined from making and selling Zicam(TM) Cold
    Remedy  until  Quigley's  patent  expires  in March  2002,  unless  any such
    injunction is pending appeal.  In addition,  the Company would be liable for
    damages  adequate to compensate  for the alleged  infringement,  which in no
    event  would be less than a  reasonable  royalty.  The  Company  denies  the
    allegations of the complaint.

11. RELATED PARTY TRANSACTIONS

    In 1998, two former  officers and directors of the Company repaid notes they
    owed to the  Company  of  $250,000  plus  $48,770 of  accrued  interest.  In
    addition,  the  Company  wrote off two  notes  receivable  in the  amount of
    $145,017, which included $24,344 of accrued interest, in connection with the
    termination of two former officers of the Company.

    In 2000, the Company loaned $200,000 to its former Chairman of the Board and
    $150,000 to the Company's President.  The notes included interest at 10% per
    annum. The Company wrote off the note receivable from its former Chairman of
    the Board of  $209,753,  which  included  $9,753 of  accrued  interest.  The
    $150,000 note  receivable  from the  Company's  President is due in December
    2001.

12. EMPLOYEE BENEFIT PLAN

    Effective September 1, 1997, the Company adopted a Simple Retirement Account
    Plan for employees.  The Company shall make a matching contribution for each
    employee in an amount equal to each employees Salary Reduction Contributions
    for the Plan  year of up to 3% of the  employees  compensation  for the Plan
    year.  The Company  made  matching  contributions  of  $31,198,  $28,250 and
    $33,353 for the years ended December 31, 2000, 1999 and 1998,  respectively.
    Each employee shall be fully vested at all times in his contribution and the
    Company's matching contributions.

13. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

    Financial   instruments   which   potentially   subject   the   Company   to
    concentrations  of  credit  risk  consist   principally  of  temporary  cash
    investments and accounts receivable. The Company places its cash equivalents
    and short term investments with high credit quality  financial  institutions
    and limits its  credit  exposure  with any one  financial  institution.  The
    Company's  cash in its banks  exceeds  the  federally  insured  limits.  The
    Company  provides  credit in the normal  course of  business  to many of the
    nation's  top drug  stores,  mass  merchandisers  and health food chains and
    major private label  companies.  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  obtains  letters of credit  from many of its foreign  customers  to
    limit its  exposure to credit risk on its accounts  receivable.  The Company
    maintains  reserves for potential  credit  losses,  and such losses have not
    exceeded management's expectations.

                                      F-21
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (CONTINUED)

    Sales to major customers,  which comprised 10% or more of net sales, for the
    years ended December 31, 2000, 1999 and 1998 were as follows:

                                 2000      1999      1998
                                 ----      ----      ----
     Customer A                    *         *       23.5%
     Customer B                    *         *       37.9%
     Customer C                    *      10.0%         *
     Customer D                 13.0%        *          *

     * Less than 10%

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

    Disclosures  about Fair Value of  Financial  Instruments  for the  Company's
    financial  instruments are presented in the table below.  These calculations
    are subjective in nature and involve  uncertainties and significant  matters
    of judgment and do not include  income tax  considerations.  Therefore,  the
    results cannot be determined with precision and cannot be  substantiated  by
    comparison  to  independent  market values and may not be realized in actual
    sale or settlement of the instruments.  There may be inherent  weaknesses in
    any calculation  technique,  and changes in the underlying  assumptions used
    could  significantly  affect the results.  The  following  table  presents a
    summary of the Company's  financial  instruments as of December 31, 2000 and
    1999:

<TABLE>
<CAPTION>
                                              2000                          1999
                                    -------------------------     -------------------------
                                     Carrying       Estimated      Carrying      Estimated
                                      Amount       Fair Value       Amount       Fair Value
                                      ------       ----------       ------       ----------
<S>                                 <C>            <C>            <C>            <C>
     Financial Assets:
       Cash and cash equivalents    $3,485,204     $3,485,204     $5,595,075     $5,595,075
       Restricted cash               1,187,114      1,187,114        270,878        270,878
     Financial Liabilities:
       Notes payable                 1,000,000      1,000,000             --             --
       Long-term debt                    2,956          2,956      2,661,002      2,661,002
</TABLE>

    The carrying amounts for cash and cash  equivalents,  receivables,  accounts
    payable and accrued  expenses  approximate  fair value  because of the short
    maturities  of these  instruments.  The fair  value  of  notes  payable  and
    long-term  debt,  including  the current  portion,  approximates  fair value
    because of the market rate of interest  on the notes  payable and  long-term
    debt and the interest  rate  implicit in the  obligations  under the capital
    leases.

15. SEGMENT INFORMATION

    Segment  information  has been  prepared  in  accordance  with SFAS No. 131,
    "Disclosure  about Segments of an Enterprise and Related  Information."  The
    Company's  operating  segments  are  organized  on the basis of products and
    include  gum  products  and nasal  gel cold and  allergy  remedies.  The gum
    products  include  gum  products  for  private  label  customers  as well as
    products  marketed under the Company's brand. The nasal gel cold and allergy
    remedies  currently  consists  of two  products,  Zicam(TM)  Cold Remedy and
    Zicam(TM)   Allergy   Relief.   There   are  no   significant   intersegment
    transactions. The table below contains information utilized by management to
    evaluate its operating segments.

                                      F-22
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                   2000
                                             ------------------------------------------------
                                             Gum Products         Zicam          Consolidated
                                             ------------         -----          ------------
<S>                                          <C>               <C>               <C>
     Net sales                               $  2,560,603      $ 10,817,286      $ 13,377,889
     Income (loss) before provision for
      income taxes and minority interest       (4,284,040)       (6,511,620)      (10,795,660)
     Interest income                              174,193           100,032           274,225
     Interest expense                            (409,971)          (48,489)         (458,460)
     Depreciation                                 452,946             7,756           460,702
     Total assets                               8,917,080         8,063,824        16,980,904

                                                                   1999
                                             ------------------------------------------------
                                             Gum Products         Zicam          Consolidated
                                             ------------         -----          ------------
     Net sales                               $  5,993,093      $  9,593,447      $ 15,586,540
     Income (loss) before provision for
      income taxes and minority interest       (2,834,797)        3,435,293           600,496
     Interest income                               73,136            50,428           123,564
     Interest expense                          (1,311,792)               --        (1,311,792)
     Depreciation                                 425,484             4,739           430,223
     Total assets                              10,209,095         9,818,819        20,027,914
</TABLE>

    The 1998 operations consisted of one operating segment, gum products.  Sales
    and operations of Zicam did not commence until January 1999.

16. JOINT DEVELOPMENT AGREEMENT

    In November  1999,  the Company  entered  into a one year Joint  Development
    Agreement  with  The  Procter  &  Gamble  Company  ("P&G")  for  potentially
    developing  new  products.  In November  2000,  the Company  entered into an
    agreement  for the  extension of the Joint  Development  Agreement  with P&G
    through  February  2001.  The  Company  received   $1,625,000  from  P&G  as
    consideration  for extending the  agreement.  The  $1,625,000 is recorded as
    deferred  revenue and amortized to income over the three month period of the
    extension agreement. $688,859 is included in other income for the year ended
    December 31, 2000.

17. JOINT VENTURE AGREEMENT

    The Company  entered into a letter of intent with Swedish Match AB ("SM") to
    form a joint venture for the purpose of developing, manufacturing, marketing
    and distributing non tobacco  nicotine  products.  The Board of Directors of
    the joint venture  consists of four members:  two members  designated by SM,
    one of which acts as chairman, and two members designated by the Company. SM
    will make a cash  commitment  of  $10,000,000  to the joint venture of which
    $3,500,000  will be  funded at the  closing  of the  formation  of the joint
    venture  and the  remainder  will be funded on an as  needed  basis,  and in
    exchange SM will  receive a 51% interest in the joint  venture.  The Company
    contributed  intellectual  property relating to its non tobacco nicotine gum
    products  to the joint  venture  and  received a 49%  interest  in the joint
    venture.

                                      F-23
<PAGE>
                   GUM TECH INTERNATIONAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18. SUBSEQUENT EVENTS

    SALE OF GUM OPERATIONS

    On January 17,  2001,  the Company  entered  into a letter of intent for the
    sale of selected  assets of the Company's gum  operations to Wm. Wrigley Jr.
    Company ("Wrigley") for approximately  $25,000,000 in cash. The assets to be
    sold  consist  of  substantially  all of the  assets  of the gum  operations
    excluding cash and accounts  receivable.  The letter of intent also provides
    for certain royalty payments and earnout provisions.  The final terms of the
    sale are subject to a definitive Asset Purchase  Agreement which is expected
    to be completed  in March 2001.  The sale will be subject to approval of the
    Company's  shareholders and closing will occur after shareholder approval is
    obtained.

                                      F-24