ITEM 1. LEGAL PROCEEDINGS
On October 16, 1996, a lawsuit was filed against Gum Tech International 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 our current and former directors. The judge's ruling on the motion for
summary judgment is not yet final, and once final, will be subject to appeal.
On January 27, 1999, an action was filed against Gum Tech International 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
alleges intentional interference with business relations, intentional
misrepresentation, negligent misrepresentation, securities fraud, and consumer
fraud. The plaintiff seeks compensatory damages of $720,000, unspecified
punitive damages, and attorneys' fees and costs. We deny the plaintiff's
allegations and intend to vigorously defend this action.[usign shareholder's men no doubt]
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On June 2, 1999, Gum Tech 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 was to act as
our financial advisor. 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 Gum Tech International 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 alleges the breach of an alleged oral finder's fee agreement
between the parties relating to the introduction of certain Bio Delivery
Technology individuals to Gum Tech in 1996. BioDelivery and Gum Tech formed a
joint venture in 1999 to manufacture, market and distribute Zicam. The complaint
seeks 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. We deny the existence, as
well as the validity, of the alleged oral agreement, and intend to vigorously
defend the action.
On November 9, 1999, The Quigley Corporation commenced a civil action
against Gum Tech International, Inc. and Gel-Tech, L.L.C. in the United States
District Court for the Eastern District of Pennsylvania. The complaint alleges
that Zicam Cold Remedy infringes on a patent licensed to The Quigley
Corporation. 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. 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 Gum Tech International and Gel
Tech LLC based on those three issues is currently pending before the United
States Court of Appeals for the Federal circuit. Each of the defendants denies
the allegations of the complaint.
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