EXHIBIT 99.2
GUM TECH INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
GUM TECH INTERNATIONAL, INC.
UNAUDITED PROFORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2001
The following unaudited proforma combined balance sheet gives effect to the
purchase of the 40% ownership interest in Gel Tech, L.L.C. ("Gel Tech") from
Zensano, Inc. ("Zensano") by Gum Tech International, Inc. ("Gum Tech") in a
transaction accounted for as a purchase. The historical consolidated financial
statements of Gum Tech include the operations of Gel Tech as Gum Tech owned a
60% interest in Gel Tech prior to acquiring the 40% interest given effect to in
the proforma financial statements. The proforma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the acquisition had
been consummated nor is it necessarily indicative of future operating results or
financial position. The unaudited proforma balance sheet gives effect to the
acquisition as if it had occurred on September 30, 2001. This proforma balance
sheet should be read in conjunction with the accompanying notes and related
historical financial statements and notes thereto of Gel Tech included herein
and of Gum Tech included in its Annual Report on Form 10-K/A for the year ended
December 31, 2000 and the Form 10-Q for the quarter ended September 30, 2001
previously filed with the Securities and Exchange Commission.
Proforma Proforma
ASSETS Gum Tech Adjustments Combined
------------ ------------ ------------
Current Assets:
Cash and cash equivalents $ 25,370,599 $ (6,220,000)(1) $ 19,150,599
Accounts receivable 2,717,270 -- 2,717,270
Inventories 1,139,971 -- 1,139,971
Prepaid expenses and other 48,923 -- 48,923
Interest receivable 110,808 -- 110,808
Notes receivable 1,200,000 -- 1,200,000
------------ ------------ ------------
Total Current Assets 30,587,571 (6,220,000) 24,367,571
------------ ------------ ------------
Property and Equipment, at cost:
Office furniture and equipment 67,080 -- 67,080
Leasehold improvements 2,112 -- 2,112
------------ ------------ ------------
69,192 -- 69,192
Less accumulated depreciation (30,172) -- (30,172)
------------ ------------ ------------
Net Property and Equipment 39,020 -- 39,020
------------ ------------ ------------
Other Assets:
Intangible assets -- 1,123,600(1) 1,123,600
Goodwill -- 15,738,427(1) 15,738,427
Deposits and other 388,821 -- 388,821
------------ ------------ ------------
Total Other Assets 388,821 16,862,027 17,250,848
------------ ------------ ------------
Total Assets $ 31,015,412 $ 10,642,027 $ 41,657,439
============ ============ ============
The accompanying notes are an integral part of these
unaudited proforma combined condensed financial statements.
F-1
GUM TECH INTERNATIONAL, INC.
UNAUDITED PROFORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2001
Proforma Proforma
LIABILITIES AND STOCKHOLDERS' EQUITY Gum Tech Adjustments Combined
------------ ------------ ------------
Current Liabilities:
Accounts payable and accrued expenses $ 1,212,262 $ -- $ 1,212,262
Customer deposits 8,576 -- 8,576
Sales returns and allowances 725,463 -- 725,463
Notes payable 1,000,000 -- 1,000,000
Income tax payable 75,000 -- 75,000
Current portion of long-term debt -- 2,240,982(1) 2,240,982
------------ ------------ ------------
Total Current Liabilities 3,021,301 2,240,982 5,262,283
------------ ------------ ------------
Long-Term Debt, net of current portion above -- 7,889,637(1) 7,889,637
------------ ------------ ------------
Minority interest in consolidated affiliate (511,408) 511,408(1) --
------------ ------------ ------------
Commitments and Contingencies -- -- --
------------ ------------ ------------
Stockholders' Equity:
Preferred stock -- -- --
Common stock 33,120,651 -- 33,120,651
Additional paid in capital 3,701,529 -- 3,701,529
Treasury stock (6,530) -- (6,530)
Accumulated deficit (8,310,131) -- (8,310,131)
------------ ------------ ------------
Total Stockholders' Equity 28,505,519 -- 28,505,519
------------ ------------ ------------
Total Liabilities and Stockholders' Equity $ 31,015,412 $ 10,642,027 $ 41,657,439
============ ============ ============
The accompanying notes are an integral part of these
unaudited proforma combined condensed financial statements.
F-2
GUM TECH INTERNATIONAL, INC.
UNAUDITED PROFORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
The following unaudited proforma combined statement of operations and per share
data gives effect to the purchase of the 40% ownership interest in Gel Tech from
Zensano by Gum Tech in a transaction accounted for as a purchase. The historical
financial statements of Gum Tech include the operations of Gel Tech as Gum Tech
owned a 60% interest in Gel Tech prior to acquiring the additional 40% interest
given effect to in the proforma financial statements. The proforma information
is presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
acquisition had been consummated nor is it necessarily indicative of future
operating results or financial position. The unaudited proforma statement of
operations gives effect to the acquisition as if it had occurred on January 1,
2000. This proforma statement of operations should be read in conjunction with
the accompanying notes and related historical financial statements and notes
thereto of Gel Tech included herein and of Gum Tech included in its Annual
Report on Form 10-K/A for the year ended December 31, 2000 and the Form 10-Q for
the quarter ended September 30, 2001 previously filed with the Securities and
Exchange Commission.
Proforma Proforma
Gum Tech Adjustments Combined
------------ ------------ ------------
Net sales $ 10,563,714 $ -- $ 10,563,714
Cost of sales 2,847,093 -- 2,847,093
------------ ------------ ------------
Gross Profit 7,716,621 -- 7,716,621
Operating expenses 9,631,057 45,145(3) 9,676,202
Research and development 586,229 -- 586,229
------------ ------------ ------------
Income (Loss) From Operations (2,500,665) (45,145) (2,545,810)
------------ ------------ ------------
Other Income (Expense):
Interest and other income 255,199 -- 255,199
Interest expense (91,574) 230,453(2) (322,027)
------------ ------------ ------------
Total Other Income (Expense) 163,625 (230,453) (66,828)
------------ ------------ ------------
Income (Loss) Before Provision For Income Taxes
and Minority Interest (2,337,040) (275,598) (2,612,638)
Provision for income taxes -- -- --
Minority interest in earnings (loss) of consolidated affiliate (403,861) 403,861(4) --
------------ ------------ ------------
Net Income (Loss) From Continuing Operations $ (1,933,179) $ (679,459) $ (2,612,638)
============ ============ ============
Net Income (Loss) From Continuing Operations Per
Basic and Diluted Share of Common Stock $ (.21) $ (.28)
Weighted Average Number of Basic and Diluted
Common Shares Outstanding 9,235,821 9,235,821
The accompanying notes are an integral part of these
unaudited proforma combined condensed financial statements.
F-3
GUM TECH INTERNATIONAL, INC.
UNAUDITED PROFORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
The following unaudited proforma combined statement of operations and per share
data gives effect to the purchase of the 40% ownership interest in Gel Tech from
Zensano by Gum Tech in a transaction accounted for as a purchase. The historical
financial statements of Gum Tech include the operations of Gel Tech as Gum Tech
owned a 60% interest in Gel Tech prior to acquiring the additional 40% interest
given effect to in the proforma financial statements. The proforma information
is presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
acquisition had been consummated nor is it necessarily indicative of future
operating results or financial position. The unaudited proforma statement of
operations gives effect to the acquisition as if it had occurred on January 1,
2000. This proforma statement of operations should be read in conjunction with
the accompanying notes and related historical financial statements and notes
thereto of Gel Tech included herein and of Gum Tech included in its Annual
Report on Form 10-K/A for the year ended December 31, 2000 and the Form 10-Q for
the quarter ended September 30, 2001 previously filed with the Securities and
Exchange Commission.
Proforma Proforma
Gum Tech Adjustments Combined
------------ ------------ ------------
Net sales $ 10,817,286 $ -- $ 10,817,286
Cost of sales 3,410,904 -- 3,410,904
------------ ------------ ------------
Gross Profit 7,406,382 -- 7,406,382
Operating expenses 15,648,112 60,193(3) 15,708,305
Research and development 433,560 -- 433,560
------------ ------------ ------------
Income (Loss) From Operations (8,675,290) (60,193) (8,735,483)
------------ ------------ ------------
Other Income (Expense):
Interest and other income 283,504 -- 283,504
Interest expense (433,237) 594,720(2) (1,027,957)
------------ ------------ ------------
Total Other Income (Expense) (149,733) (594,720) (744,453)
------------ ------------ ------------
Income (Loss) Before Provision For Income Taxes
and Minority Interest (8,825,023) (654,913) (9,479,936)
Provision for income taxes 8,585 -- 8,585
Minority interest in earnings (loss) of consolidated affiliate (2,667,165) 2,667,165(4) --
------------ ------------ ------------
Net Income (Loss) From Continuing Operations $ (6,166,443) $ (3,322,078) $ (9,488,521)
============ ============ ============
Net Income (Loss) From Continuing Operations Per
Basic and Diluted Share of Common Stock $ (.69) $ (1.07)
Weighted Average Number of Basic and Diluted Common
Shares Outstanding 8,906,635 8,906,635
The accompanying notes are an integral part of these
unaudited proforma combined condensed financial statements.
F-4
GUM TECH INTERNATIONAL, INC.
NOTES TO UNAUDITED PROFORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On December 5, 2001 Gum Tech entered into a Purchase Agreement (the
"Agreement") to acquire the 40% interest in Gel Tech owned by Zensano, Inc.
Gum Tech now owns 100% of Gel Tech. Under the terms of the Agreement, Gum
Tech paid $6.1 million in cash at closing and will make four subsequent
cash payments of $2.75 million each spread out over the next two years, for
a total cash purchase price of $17.1 million. The purchase price is subject
to an adjustment if total net sales of Gel Tech exceed $17.0 million in
2001. In addition, Gum Tech will pay a two percent royalty on net sales in
excess of $6.0 million in the first quarter of 2002, and further, will
compensate Zensano with an additional amount if Gum Tech sells all or part
of Gel Tech within twelve months of closing the transaction that results in
net proceeds to Gum Tech in excess of the amount paid to Zensano.
The historical consolidated financial statements of Gum Tech include the
operations of Gel Tech as Gum Tech owned a 60% interest in Gel Tech prior
to acquiring the additional 40% interest from Zensano.
The proforma combined condensed balance sheet gives effect to the purchase
of the 40% ownership interest in Gel Tech from Zensano in a transaction
accounted for as a purchase. The transaction is reflected in the proforma
balance sheet as if it occurred on September 30, 2001.
The proforma combined condensed statements of operations give effect to the
purchase of the 40% ownership interest in Gel Tech from Zensano in a
transaction accounted for as a purchase. The transaction is reflected in
the proforma statements of operations as if it occurred on January 1, 2000.
The historical statements of operations of Gum Tech do not report the
operations of Gum Tech's gum operations which was an operating segment that
has been discontinued. Rules of the Securities and Exchange Commission
require only the portion of the statement of operations through income from
continuing operations to be used in preparing proforma financial results.
Proforma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited proforma financial information presented herein is not
necessarily indicative of the results of operations or financial position
that Gum Tech would have obtained had such events occurred at the beginning
of the year, as assumed, or of the future results of Gum Tech. The proforma
financial statements should be read in conjunction with the historical
financial statements and notes thereto included in Gum Tech's Annual Report
on Form 10-K/A for the year ended December 31, 2000 and the Form 10-Q for
the quarter ended September 30, 2001 previously filed with the Securities
and Exchange Commission.
2. PROFORMA NET INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE OF COMMON
STOCK
The proforma net income (loss) from continuing operations per share of
common stock is based on the weighted average number of common shares
outstanding during the periods.
3. PROFORMA ADJUSTMENTS
Adjustments to present the proforma combined condensed financial statements
are as follows:
F-5
GUM TECH INTERNATIONAL, INC.
NOTES TO UNAUDITED PROFORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
3. PROFORMA ADJUSTMENTS (CONTINUED)
1. Record the purchase of the 40% ownership interest in Gel Tech for
$17,120,000 less the imputed interest on the note payable to Zensano
of $869,381, resulting in a net purchase price of $16,250,619. The
Company estimates legal expenses and other direct costs of the
acquisition to be approximately $100,000 which are added to the cost
of the assets acquired.
2. Record interest expense on the note payable incurred for the purchase
of the 40% ownership interest in Gel Tech. The note is a non-interest
bearing note and the Company has imputed interest at 6.5% per annum.
3. Record amortization expense of the patent recorded in the acquisition.
The patent is amortized over its remaining life of 224 months as of
January 1, 2000. The goodwill has an indefinite life and is not
amortized.
4. To remove the minority interest in earnings (loss) of consolidated
affiliate. The purchase of the 40% ownership interest in Gel Tech
results in Gum Tech owning 100% of Gel Tech and there is no longer a
minority interest in the earnings (loss) of Gel Tech.
F-6