UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(MARK ONE)

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

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                       OR

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

                FOR THE TRANSITION PERIOD FROM _______ TO _______

                         Commission File number 0-27646


                          GUM TECH INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in it charter)


            UTAH                                               87-0482806
  (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         Identification Number)


                             246 EAST WATKINS STREET
                                PHOENIX, AZ 85004
                    (Address of principal executive offices)

                                 (602) 252-1617
                           (Issuer's telephone number)

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

There  are  6,852,999  shares of the  registrant's  common  stock,  no par value
outstanding as of November 9, 1998.
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                                   FORM 10-QSB
                                      INDEX

Part I Financial Information                                                Page

       Item 1.  Condensed Balance Sheet as of September 30, 1998              1

                Condensed Statements of Operations for the three
                months ended September 30, 1998 and 1997                      3

                Condensed Statements of Operations for the nine
                months ended September 30, 1998 and 1997.                     4

                Condensed Statements of Cash Flows for the nine
                months ended September 30, 1998 and 1997                      5

                Notes to Condensed Financial Statements                       6

       Item 2.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations                           7

Part II Other Information and Signatures                                     13
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                             CONDENSED BALANCE SHEET
                               September 30, 1998
                                   (Unaudited)


                                     ASSETS

Current Assets:
 Cash and cash equivalents                                          $ 1,781,213
 Restricted cash                                                        163,007
 Accounts receivable, net of allowance
   for doubtful accounts of $25,758                                   1,221,965
 Inventories                                                          1,505,702
 Prepaid expenses and other                                             107,048
                                                                    -----------

    Total Current Assets                                              4,778,935
                                                                    -----------

Property and Equipment, at cost:
 Machinery and production equipment                                   3,993,845
 Office furniture and equipment                                         175,013
 Leasehold improvements                                                 295,169
                                                                    -----------

 Total Property and Equipment                                         4,464,027

 Less accumulated depreciation                                       (1,204,014)
                                                                    -----------

    Net Property and Equipment                                        3,260,013
                                                                    -----------

Other Assets:
 Intangible assets, net of accumulated
   amortization of $139,539                                             131,843
 Deposits and other                                                     287,770
                                                                    -----------

      Total Other Assets                                                419,613
                                                                    -----------

      Total Assets                                                  $ 8,458,561
                                                                    ===========

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

                                       1
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                             CONDENSED BALANCE SHEET
                               September 30, 1998
                                   (Continued)
                                   (Unaudited)


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable                                                 $    649,545
  Accrued interest                                                       45,794
  Customer deposits                                                     138,852
  Current portion of long-term debt                                     372,161
                                                                   ------------

      Total Current Liabilities                                       1,206,352
                                                                   ------------

Long Term Debt, net of current portion above:
  Financial institutions and other                                    2,923,823
  Obligations under capital leases                                       26,649
  Less current portion above                                           (372,161)
                                                                   ------------

      Total Long Term Debt                                            2,578,311
                                                                   ------------
Stockholders' Equity:
  Preferred stock: no par value, 1,000,000
    shares authorized, none issued or
    outstanding                                                              --
  Common stock: no par value, 20,000,000 shares authorized,
   6,831,947 shares issued and outstanding                           15,016,915
  Additional paid in capital                                          2,174,356
  Accumulated deficit                                               (12,517,373)
                                                                   ------------

      Total Stockholders' Equity                                      4,673,898
                                                                   ------------

      Total Liabilities and Stockholders' Equity                   $  8,458,561
                                                                   ============

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

                                       2
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                Three months ended September 30,
                                                --------------------------------
                                                       1998            1997
                                                       ----            ----

Net sales                                          $ 1,286,176     $ 1,284,746

Cost of sales                                        1,000,323         820,149
                                                   -----------     -----------

      Gross Profit                                     285,853         464,597

Operating expenses                                     545,237         825,981
Research and development                               273,237          21,754
                                                   -----------     -----------

      Income  (Loss) From Operations                  (532,621)       (383,138)
                                                   -----------     -----------
Other Income (Expense):
  Interest and other income                             34,045          67,083
  Interest expense                                    (122,056)       (120,006)
                                                   -----------     -----------

      Total Other Income (Expense)                     (88,011)        (52,923)
                                                   -----------     -----------
Income (Loss) Before Provision For
  Income Taxes                                        (620,632)       (436,061)

Provision for income taxes                                  --              --
                                                   -----------     -----------

Net Income (Loss)                                  $  (620,632)    $  (436,061)
                                                   ===========     ===========
Net Income (Loss) Per Share of Common Stock:
  Basic:
     Weighted Average Number of Common
       Shares Outstanding                            6,808,776       5,464,435
                                                   ===========     ===========
      Net Income (Loss) Per Share of Common Stock  $     (0.09)    $     (0.08)
                                                   ===========     ===========
  Diluted:
     Weighted Average Number of Common
       Shares Outstanding                            6,808,776       5,464,435
                                                   ===========     ===========
      Net Income (Loss) Per Share of Common Stock  $     (0.09)    $     (0.08)
                                                   ===========     ===========

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

                                       3
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                Nine months ended September 30,
                                                -------------------------------
                                                     1998            1997
                                                     ----            ----

Net sales                                        $ 3,603,693     $ 2,592,434

Cost of sales                                      2,815,423       2,948,498
                                                 -----------     -----------

      Gross Profit                                   788,270        (356,064)

Operating expenses                                 4,534,909       2,211,162
Research and development                             415,109          92,971
                                                 -----------     -----------

      Income  (Loss) From Operations              (4,161,748)     (2,660,197)
                                                 -----------     -----------
Other Income (Expense):
  Interest and other income                          109,173         148,786
  Interest expense                                  (383,680)       (979,956)
                                                 -----------     -----------

      Total Other Income (Expense)                  (274,507)       (831,170)
                                                 -----------     -----------
Income (Loss) Before Provision For
  Income Taxes                                    (4,436,255)     (3,491,367)

Provision for income taxes                               150              --
                                                 -----------     -----------

Net Income (Loss)                                $(4,436,405)    $(3,491,367)
                                                 ===========     ===========
Net Income (Loss) Per Share of Common Stock:
  Basic:
    Weighted Average Number of Common
      Shares Outstanding                           6,372,842       5,122,527
                                                 ===========     ===========
    Net Income (Loss) Per Share of
      Common Stock                               $     (0.70)    $     (0.68)
                                                 ===========     ===========
  Diluted:
     Weighted Average Number of Common
       Shares Outstanding                          6,372,842       5,122,527
                                                 ===========     ===========
      Net Income (Loss) Per Share of
       Common Stock                              $     (0.70)    $     (0.68)
                                                 ===========     ===========

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

                                       4
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                 Nine months ended September 30,
                                                 -------------------------------
                                                        1998            1997
                                                        ----            ----
Cash Flows From Operating Activities:
 Net income (loss)                                   $(4,436,405)   $(3,491,367)
 Adjustments to reconcile net income (loss)
  to net cash (used) by operating activities:
    Depreciation                                         201,260        431,171
    Amortization                                          91,828         34,504
    Compensation from forgiveness of note receivable     114,012             --
    Compensation from extension and issuance
      of stock options                                 1,508,566             --
    Interest expense from beneficial conversion
      feature of notes payable                                --        665,790
    Accrued interest on notes receivable                  60,164        (59,763)
    Changes in assets and liabilities:
      (Increase) in accounts receivable                 (139,731)      (233,924)
      Decrease in employee receivable                     61,054             --
      Decrease in income tax receivable                       --        234,440
      (Increase) Decrease in inventories                (472,320)       269,661
      (Increase) Decrease in prepaid expenses
        and other                                          9,157        (94,073)
      (Increase) Decrease in deposits and other         (246,664)       166,623
      (Decrease) in accounts payable and accrued
        expenses                                        (105,119)        (8,850)
      Increase (Decrease) in customer deposits           123,852        (64,684)
                                                     -----------    -----------

    Net Cash (Used) By Operating Activities           (3,230,346)    (2,150,472)
                                                     -----------    -----------
Cash Flows From Investing Activities:
 Capital expenditures                                   (585,903)      (165,800)
 Receipt of principal on notes receivable                250,000             --
 Increase in notes receivable                                 --        (61,585)
                                                     -----------    -----------

 Net Cash (Used) By Investing Activities                (335,903)      (227,385)
                                                     -----------    -----------
Cash Flows From Financing Activities:
 Proceeds from borrowing                                      --      2,530,000
 Principal payments on notes payable                    (253,483)      (165,728)
 Issuance of common stock upon exercise of
  options and warrants                                 2,004,765      4,121,768
 Costs for issuance of common stock                           --       (188,678)
 Debt issuance costs incurred                            (11,733)      (259,648)
                                                     -----------    -----------

 Net Cash Provided By Financing Activities             1,739,549      6,037,714
                                                     -----------    -----------
 Net Increase (Decrease) in Cash and
  Cash Equivalents                                    (1,826,700)     3,659,857

 Cash and Cash Equivalents at Beginning of Period      3,607,913      1,116,751
                                                     -----------    -----------

 Cash and Cash Equivalents at End of Period          $ 1,781,213    $ 4,776,608
                                                     ===========    ===========
Supplemental Disclosure of Cash Flow Information:
 Cash paid during the period for:
   Interest                                          $   316,204    $   209,515
   Income taxes                                               --             --
Supplemental Disclosure of Non Cash Investing
 and Financing Activities:
  Conversion of notes payable into common stock      $   924,000    $        --

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

                                       5
<PAGE>
                          GUM TECH INTERNATIONAL, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   The  accompanying  financial  information  of the  Company is  prepared  in
     accordance with the rules prescribed for filing condensed interim financial
     statements and,  accordingly,  does not include all disclosures that may be
     necessary for complete  financial  statements  prepared in accordance  with
     generally accepted  accounting  principles.  The disclosures  presented are
     sufficient,  in  management's  opinion,  to make  the  interim  information
     presented not misleading.  All adjustments,  consisting of normal recurring
     adjustments,  which are necessary so as to make the interim information not
     misleading, have been made. Results of operations for the nine months ended
     September 30, 1998 are not necessarily  indicative of results of operations
     that  may be  expected  for  the  year  ending  December  31,  1998.  It is
     recommended  that this  financial  information  be read  with the  complete
     financial statements included in the Company's Annual Report on Form 10-KSB
     for the year ended December 31, 1997  previously  filed with the Securities
     and Exchange Commission.

2.   As of  December  31,  1997,  the Company  adopted  Statement  of  Financial
     Accounting  Standards (SFAS) No. 128, "Earnings Per Share", which specifies
     the method of  computation,  presentation  and  disclosure  of 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 1998 and  1997 and the  inclusion  of stock
     options and other incremental  shares would be antidilutive.  Consequently,
     options,  warrants and other incremental  shares to purchase  1,085,968 and
     2,597,680  shares of common  stock at  September  30,  1998 and 1997,  were
     excluded from the computation of diluted earnings per share.

                                       6
<PAGE>
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

         The Company was  organized  in 1991 to develop,  market and  distribute
specialty chewing gum products. The Company's first chewing gum product included
a natural caffeine substance marketed to runners and other exercise  enthusiasts
as a source of energy and  carbohydrates.  In 1994 and 1995,  the Company raised
funds  through  debt and equity  financings  which were used to  establish a new
management team, develop additional chewing gum products,  build inventories and
purchase   manufacturing   equipment  for  the  Company's   28,000  square  foot
manufacturing  facility,  which  commenced  operations in March 1996. All of the
Company's  chewing gum products are researched,  developed,  and manufactured at
the facility.  The Company's  packaging and warehousing  operations,  previously
conducted at the manufacturing  facility,  were relocated in September 1998 to a
nearby 31,000 square foot leased building.  The Company's  corporate offices are
located at the manufacturing facility.

         The Company  develops and manufactures  specialty  chewing gum products
for branded and private label customers,  as well as products marketed under the
Gum Tech brand.  The  products  contain  vitamins,  herbals  and/or  active drug
ingredients. Gum Tech currently targets four market segments: oral care, smoking
cessation,  dietary supplement,  and over-the-counter  (OTC) drug. The Company's
current  strategy is to offer its  research and the use of its  formulations  in
exchange for  co-manufacturing  agreements  with major branded and private label
customers that possess the capital resources to promote  functional  chewing gum
on a large  national and  international  scale.  The Company  currently  employs
approximately 60 people, but also utilizes  additional  contract workers to meet
regular and peak production requirements.

                                       7
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED  SEPTEMBER 30, 1998 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1997

         The  following  table  sets  forth  certain   Statement  of  Operations
information  expressed  both in dollars and as a percentage of net sales for the
periods indicated:
                                              THREE MONTHS ENDED SEPTEMBER 30,
                                              --------------------------------
                                                 1998                 1997
                                                 ----                 ----
Net sales                               $1,286,176    100%   $1,284,746    100%
Cost of sales                            1,000,323     78       820,149     64
                                        ----------   ----    ----------   ----
Gross profit                               285,853     22       464,597     36
Operating expenses                         545,237     42       825,981     64
Research and development                   273,237     21        21,754      2
                                        ----------   ----    ----------   ----
Income (Loss) from operations             (532,621)   (41)     (383,138)   (30)
Interest and other income                   34,045      3        67,083      5
Interest expense                           122,056      9       120,006      9
Provision (benefit) for income taxes            --     --            --     --
                                        ----------   ----    ----------   ----
Net income (loss)                       $ (620,632)   (48)%  $ (436,061)   (34)%

         NET SALES. Net sales for the three months ended September 30, 1998 were
$1,286,176,   virtually  unchanged  from  the  year  earlier  period.   Contract
manufacturing  sales  increased  to more than 90% of the total  compared to less
than 45% in 1997,  reflecting  a change in Company  strategy  in early 1998 from
direct  marketing  of  its  own  products  to a  greater  emphasis  on  contract
manufacturing  for others.  A major protion of this increase was attributable to
sales of dental gum under the Company's  agreement with BreathAsure entered into
June 1998. Other significant sales during this period resulted from contracts to
provide  a diet  gum to  Herbalife  and an  analgesic  gum  (Aspergum(R))and  an
antacid/calcium  replacement gum (Chooz(R)) to Heritage Consumer Products. Sales
in the 1997 period were significantly impacted by initial orders of Cigarest(R),
a homeopathic  smoking  cessation  product,  which was marketed  directly by the
Company at that time.

         COST OF SALES.  Cost of sales  increased  to  $1,000,323  for the three
months ended September 30, 1998, or $180,174 above the prior year period.

         GROSS PROFIT. Gross profit for the 1998 quarter was $285,853, down from
$464,597 in 1997, principally reflecting a change in sales mix.

         OPERATING  EXPENSES.  Operating  expenses decreased to $545,237 for the
quarter compared to $825,981 the prior year.  Advertising and marketing expenses
decreased $408,000 due to the Company's shift in strategy.  Depreciation expense
decreased $72,000 due to the  refinancing/restructuring  of a capital lease debt
obligation  into a term  loan  facility,  which  allowed  for  depreciating  the
equipment over its estimated useful life instead of the term of the lease. These
decreases were offset in part by a reclassification from earlier periods in 1998

                                       8
<PAGE>

of Operating  expenses to Research &  Development  to conform with 1997 year-end
presentation  ($67,000)  and a  decrease  in the  amount of  Operating  expenses
allocated to Cost of Goods ($290,732 in 1998 vs. $440,340 in 1997).

         RESEARCH  &  DEVELOPMENT   EXPENSE.   Research  &  development  expense
increased  due to the  reclassification  noted above and due to increases in the
Company's research and development  activities,  including formulation,  process
and ingredient  validation  and  production  scale-up of several new products in
1998.

         INTEREST  EXPENSE.  Interest  expense for the third quarter of 1998 was
$122,056, approximately the same as the year earlier period. Interest expense in
1998 was impacted by the conversion of  approximately $ 525,000 of the Company's
convertible  debt into equity during the third quarter of 1998 which resulted in
an accelerated expensing of debt issuance costs.

         NET INCOME (LOSS). Net loss for the third quarter of 1998 was $620,632,
or an increase of $184,571 over the year earlier period.

RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED  SEPTEMBER 30, 1998 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1997.

         The  following  table  sets  forth  certain   Statement  of  Operations
information  expressed  both in dollars and as a percentage of net sales for the
periods indicated:
                                             NINE  MONTHS ENDED  JUNE 30,
                                             ----  ------------  --------
                                                 1998                1997
                                                 ----                ----
Net sales                             $ 3,603,693    100%   $ 2,592,434    100%
Cost of sales                           2,815,423     78      2,948,498    114
                                      -----------   ----    -----------   ----
Gross profit                              788,270     22       (356,064)   (14)
Operating expenses                      4,534,909    126      2,211,162     85
Research and development                  415,109     11         92,971      4
                                      -----------   ----    -----------   ----
Income (Loss) from operations          (4,161,748)  (115)    (2,660,197)  (103)
Interest and other income                 109,173      3        148,786      6
Interest expense                          383,680     11        979,956     38
Provision (benefit) for income taxes          150     --             --    _-_
                                      -----------   ----    -----------   ----
Net income (loss)                     $(4,436,405)  (123)%  $(3,491,367)  (135)%

         NET  SALES.  Net sales for the nine  months  ended  June  30,1998  were
$3,603,693,  an increase of $1,011,259, or 39%, above the year earlier period. A
significant  portion  of this  increase  in sales was  attributable  to  product
deliveries of Cigarest's  smoking  cessation  gum,  Herbalife's  diet and energy
gums,  Heritage Consumer  Product's  Aspergum(R) and Chooz (R), and Breath Asure
dental gum.

         COST OF  SALES.  Cost  of  Sales  for the  nine  month  period  in 1998
decreased  $133,075 to $2,815,423 from $2,948,498 in 1997. The cost of sales for

                                       9
<PAGE>

the nine  months  ended  September  30,  1997  included  costs of  approximately
$700,000  associated with sales under the Company's barter  agreements for which
corresponding revenues are not reflected.

         GROSS PROFIT. Gross Profit for the nine months ended September 30, 1998
was  $788,270,  or 22% of Net Sales.  This  represents  an increase of more than
$1,144,334 from the year earlier period.

         OPERATING  EXPENSES.  Operating  expenses  for the  nine  months  ended
September 30, 1998 were  $4,534,909  compared to $2,211,162  for the same period
1997. The increase in expenses was  principally  attributable to an extension of
the  term  of  certain  stock  options  to  a  former  officer  of  the  Company
($1,478,750) and severance compensation expenses ( $618,230).

         RESEARCH AND DEVELOPMENT.  Research and Development  expenses increased
by  $322,138  to  $415,109  for  the  nine  months  ended  September  30,  1998,
principally  due  to an  increase  in the  Company's  research  and  development
activities  related to the  development  and production  scale-up of several new
products in 1998.

         INTEREST  EXPENSE.  Interest  expense was  $383,680 for the nine months
ended  September 30, 1998, a decrease of $596,276 from the year earlier  period.
Interest  expense  in the 1997  period  was  impacted  by a  non-cash  charge of
$665,790 related to a beneficial conversion feature received by investors in the
Company's convertible debentures issued in March, 1997.

         NET INCOME  (LOSS).  Net loss for the nine months ended  September  30,
1998 was $4,436,405  compared to a net loss of $3,491,367 for the same period in
1997. After adjusting for the stock option extension and severance  compensation
expense noted above,  the Net loss for the nine months ended  September 30, 1998
would be $2,339,425 or an improvement of approximately  $1.15 million versus the
1997 period.

LIQUIDITY AND CAPITAL RESOURCES

         As of  September  30, 1998,  the  Company's  working  capital was $3.57
million  compared to $5.09  million at  December  31,  1997.  For the nine month
period ended September 30, 1998, the Company experienced a decrease in cash used
by operating  activities  of $3.2 million  primarily as a result of the net loss
incurred .

         Investing  activities  consumed  $335,903  of cash for the nine  months
ended September 30, 1998 compared to $227,385 of cash used in the same period in
1997. The amount for 1998 reflects the repayment of two  outstanding  notes from
former  officers of the Company.  In addition to the  acquisition  of additional
manufacturing  equipment in 1997,  investing  activities in 1997 also reflect an
increase in a note receivable from a former officer.

                                       10
<PAGE>

         Financing  activities provided $1.7 million in cash for the nine months
ended  September  30, 1998 compared to $6.0 million for the same period in 1997.
The 1998 amount reflects cash received from the exercise of common stock options
and  warrants.  The 1997 amount  reflects  cash  received  from the  exercise of
warrants  issued in conjunction  with the Company's  Initial Public Offering and
the issuance of the Company's convertible notes in March 1997.

         On August 21, 1998,  the Company  entered  into a five-year  lease of a
31,460  square  foot  building  located in the same  vicinity  as the  Company's
headquarters/gum   manufacturing   facility.  The  new  building  will  be  used
principally for the Company's  packaging and warehouse  operations.  The monthly
base rent of the lease is $10,067,  $11,955,  $12,584,  $13,257,  and $14,157 in
each of the five years, respectively.

OUTLOOK

         The  results  for the third  quarter do not reflect any sales under the
Company's  agreement with  Ranir/DCP.  Initial sales to some of Ranir's  private
label clients will be made in the fourth quarter of 1997 and the Company expects
Ranir to expand these sales to most of its  remaining  clients in the first half
of 1999.

         The Company is  currently  in  discussions  with  several  bank/finance
companies  to  establish  a short term  credit  facility  to finance its growing
inventory and accounts  receivable.  The Company  anticipates  that this line of
credit will be in place by year-end.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements.  Additional written or
oral forward-looking  statements may be made by the Company from time to time in
filings  with  the   Securities   Exchange   Commission   or   otherwise.   Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Act of
1934,  as  amended.  Such  statements  may  include,  but may not be limited to,
projections  of revenues,  income or loss,  estimates  of capital  expenditures,
plans for future operations, products or services, and financing needs or plans,
as well as assumptions relating to the foregoing. The words "believe," "expect,"
"anticipate,"   "estimate,"   "project,"   and  similar   expressions   identify
forward-looking  statements,  which speak only as of the date the  statement was
made. Specifically,  this report contains forward-looking  statements concerning
plant efficiencies and capacities,  capital spending,  research and development,
and other  projected  expenses,  among others.  Forward-looking  statements  are
inherently subject to risks and uncertainties, some of which cannot be predicted
or  quantified.  Future events and actual results could differ  materially  from
those  set  forth  in,   contemplated  by,  or  underlying  the  forward-looking
statements. The statements included in this report, particularly those contained
in this Item 2, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and in the Notes to the Company's Financial  Statements,
describe  factors,  among  others,  that  could  contribute  to  or  cause  such
differences,  including business conditions and the general economy, competitive
factors,  such as  rival  gum  manufacturers'  pricing  and  marketing  efforts,
availability  of third-party  material  products at reasonable  prices,  risk of

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<PAGE>

non-payment  of accounts  receivable,  risks of  inventory  obsolescence  due to
shifts  in  market  demand,  timing  of  product  introductions  and  litigation
involving product liabilities and consumer issues.

DATA PROCESSING AND TECHNOLOGY AND YEAR 2000

         The Company  recognizes the potential  business  impacts related to the
Year 2000 computer system issue and is implementing a plan to assess and improve
the  Company's  state of readiness  with  respect to such issues.  The Year 2000
issue is one where computer  systems may recognize the designation  "00" as 1900
when it means 2000, resulting in system failure or miscalculations.

         In  recognition  of the Year 2000  issue,  the  Company  has  started a
comprehensive   review  of  all  information   technology  and   non-information
technology  systems  used by the  Company.  Such  review  includes  testing  and
analysis  of  Company   products  and  inquiries  of  third  parties   supplying
information technology and non-information technology systems, computer hardware
and software products and components, and other equipment to the Company.

         As a result of its review to date,  the  Company  has  determined  that
certain of its internal  software  systems may be  inadequate  for the Company's
future  business  needs,  and  may  need  to  be  updated,  because  of  various
considerations,  including Year 2000 non-compliance. The Company expects to make
necessary modifications or changes to its computer information systems,  related
to Year 2000  non-compliance,  prior to the Year 2000. The Company  believes the
costs of modification  to the current  information  technology  systems will not
have a material effect on its financial position or results of operations.

         At this time,  the  Company  has not  developed  Year 2000  contingency
plans,  other than the review and remedial actions described above, and does not
intend to do so unless  the  Company  believes  such  plans are  merited  by the
results of its continuing Year 2000 review.

         If the  Company or the third  parties  with which it has  relationships
were to cease or not successfully  complete their Year 2000 remediation efforts,
the  Company  could  encounter  disruptions  to its  business  that could have a
material  adverse  effect on its  business,  financial  position  and results of
operations.  The Company  also could be  materially  and  adversely  impacted by
widespread  economic or financial market disruption caused by Year 2000 computer
system failures.

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<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On October  16,  1996,  a lawsuit  was filed  against the Company 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 the Company, principally alleged that the
Company engaged in unlawful rebates, appropriations and overcharges,  commercial
bribery, fraud and unjust enrichment.  On September 4, 1998, the Judge granted a
motion  for  summary  judgment  in  favor  of the  Company,  and  dismissed  the
plaintiff's claims against the Company and its current and former directors. The
ruling remains subject to appeal.

     On August 27,  1997, a lawsuit was filed by Paul R.  Janssens-Lens  against
the  Company,  in the case of  Janssens-Lens  v. Gum Tech  International,  Inc.,
Kensington  Securities,  Inc.,  Kirtis  Wyatt and Jane Doe Wyatt in the Superior
Court of Arizona, in and for the County of Maricopa, case number CV97-15896. The
Jansenns-Lens  lawsuit  alleged  both  breach  of  contract  and  tort  actions,
including   intentional   interference  with  prospective   economic  advantage,
misrepresentation,  securities fraud and consumer fraud and sought  compensatory
damages  in an  amount  of no less than  $1,680,000,  together  with an award of
punitive  damages in an amount to be determined at trial. The lawsuit settled in
the  early  stages  between  plaintiff  Paul  R.  Janssens-Lens  and  defendants
Kensington  Securities,  Inc. and Kirtis Wyatt. The suit against the Company was
recently dismissed without prejudice for lack of prosecution.

     On March 26,  1998,  Roy Kaplan filed a charge of  discrimination  with the
California  Department of Fair  Employment and Housing and the Equal  Employment
Opportunity  Commission  alleging  discrimination  based  on age  and  religion.
Specifically,  he alleges that he was terminated  from his position as Executive
Vice  President  of  Sales  because  of his age (63) and  religion  (Jewish).  A
tentative  settlement  has been reached  between the Company and Mr. Kaplan that
will not have a material impact on the Company.

     On July 2, 1998, Kirk Gossett,  a former  employee of the Company,  filed a
lawsuit against the Company and three officers and employees of the Company, and
their spouses,  alleging  violation of overtime  requirements  of the Fair Labor
Standards Act. Mr. Gossett is claiming  damages of over $80,000,  in addition to
seeking  treble  damages  permitted  under  the  Act.  The  Company  denies  all
allegations and intends to vigorously defend the suit.

ITEM 2. CHANGES IN SECURITIES

        None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None
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<PAGE>

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

        None

ITEM 5. OTHER

        None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          A.   Exhibits

               10(a).  Lease  agreement  between  Gum  Tech   International  and
                       Beardsley & I-17L.L.C., for the lease of packaging/
                       warehouse facility

               10(b).  Employment agreement of William J. Hemelt

               27.     Financial Data Schedule

          B.   Reports on Form 8-K

               None

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<PAGE>

                                   SIGNATURES


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


Gum Tech International, Inc.


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

/s/ William J. Hemelt
------------------------------
William J. Hemelt
Chief Financial Officer


November 13, 1998


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