GUM TECH CUT ITS TIES TO OUSTED STOCKBROKER
05/09/1996
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Arizona's newest public company has started trading on the Nasdaq stock exchange after severing financial ties with a former stockbroker whose license was revoked for securities fraud.
Phoenix-based Gum Tech International (Nasdaq: GUMM) makes specialty chewing gums for such uses as losing weight, boosting energy and cleansing breath.
Both John E. Epert, the company's chairman and president, and former stockbroker Brett L. Bouchy, have links to Unitech Industries, an electronics firm in Scottsdale that filed for Chapter 11 bankruptcy protection in January, a month after announcing it may have misstated its earnings.
Epert serves on Unitech's board of directors. Bouchy helped finance Unitech before its initial public offering in November 1994.
Bouchy says he no longer has ties with either Gum Tech or Unitech.
Shareholder lawsuits accuse Unitech of falsely reporting strong sales and earnings growth, which drove share prices up and allowed insiders to profit from selling parts of their holdings.
Epert acknowledged that he sold some shares before the company's downfall, but said they amounted to less than 5 percent of his holdings in the company. His losses were extensive when the stock price collapsed, he said.
Of his profitable sale of Unitech stock, Epert said, "I can guarantee you it was not because I knew any negative inside information." At the time of the sales, the company's auditors at Coopers & Lybrand said the company was doing fine, he added.
Michael Marrie, who was managing partner of the Phoenix office of Coopers & Lybrand at the time, declined to comment. He now heads administrative and business operations at Snell & Wilmer, a law firm in Phoenix.
The ex-stockbroker, Bouchy, 27, said a distinction must be made between Unitech and Gum Tech. "Each company speaks for itself," he said.
On April 24, the Arizona Corporation Commission rejected requests by Bouchy and a former colleague, Richard C. Whelan, 31, for a rehearing of their license revocations and penalties.
In the early 1990s, Bouchy and Whelan ran a now-closed Scottsdale brokerage called Franklin-Lord. The brokerage and both men were fined and their licenses revoked earlier this year by the state for allegedly manipulating stock prices and engaging in other fraudulent securities practices, none related to Unitech.
Also, both men have been disciplined by the National Association of Securities Dealers, which runs Nasdaq, for a variety of securities violations.
NASD insisted that Bouchy sell his equity stake in Gum Tech as a condition of Nasdaq listing, according to the April 16 Gum Tech prospectus filed with the Securities and Exchange Commission.
"The National Market's objection to allowing Mr. Bouchy to remain an equity holder in the company resulted from fines and censures imposed upon Mr. Bouchy by the NASD and the Securities Commission of the State of Arizona," the filing says.
Bouchy, who grew up in the east Valley and now lives in Incline Village, Nev., defended his role in Gum Tech.
He took on a "tremendous amount of risk" by initially investing in Gum Tech, held stock for more than a year, and invested considerable "time, effort and work" into the company, he said.
Gum Tech's financial results reflect improvement, he said. The company's pre-tax income for 1995 was $768,321 on revenues of $4.3 million. That compares with pre-tax income of $231,589 on $1.9 million in revenue in 1994.
Gum Tech is expecting further strong growth in 1996, Bouchy added.
Bouchy estimated his profit in Gum Tech deals at $2 million to $3 million.
Epert said Bouchy "found a company that was not doing much" and has enhanced its value. He noted the addition of officers and directors and the company's move to manufacture its own products. Earlier, it outsourced the work.
As for his past, Bouchy said Franklin-Lord has been the subject of much criticism, but the brokerage's track record includes having underwritten the initial public offerings of several companies, including Employee Solutions (Nasdaq: ESOL), a Phoenix-based employee leasing concern, Bouchy notes.
Employee Solutions' earnings swelled to $3.8 million in 1995, up nearly tenfold from a year earlier. Revenue in 1995 was $165 million, compared with $74 million in 1994.
Epert, too, said Bouchy has severed his ties to Gum Tech.
"The only association with Mr. Bouchy was that he was an investor early on. When the SEC objected to him being involved, we asked him to liquidate his positions, which he did," Epert said.
Bouchy added that Gum Tech repaid loans he had made to the company out of the proceeds of the recent IPO. He now has no role in the company, he said.
Epert referred questions about regulators' concerns about Bouchy's role in Gum Tech to Englewood, Colo., attorney Gary A. Agron, who handled the prospectus filing. Agron declined to comment.
Epert explained that his roles in Unitech and Gum Tech grew from his earlier investing through the Franklin-Lord brokerage.
Gum Tech's IPO raised $7.4 million for the company.
Gum Tech, organized as a Utah corporation in 1991, is a newcomer to Arizona. In February it completed improvements and began manufacturing product in its 28,000-square-foot facility in Phoenix, according to the prospectus.
The company's product line includes gums with ingredients that Gum Tech claims promote weight loss (ChromaTrim and CitrusSlim brand names), contribute to energy and endurance (Buzz Gum, Power Gum and Love Gum brands), alleviate certain premenstrual symptoms (Repose brand) and promote oral hygiene and fresh breath (DentaHealth brand), the prospectus says.
Brett Bouchy's role in financing Gum Tech, as described in the prospectus, began in November 1994 when Gregory Gossett, then the company's president and majority stockholder, sold just over 2 million shares, at 48 cents per share, to Dale Holdings LDC. At that time, and until December 1995, Dale was owned 51 percent by Riverlux Trust REG, a Liechtenstein company, and 49 percent by Bouchy.
In February 1995, Dale sold 367,150 shares of common stock to a group of 11 investors for $560,000, or $1.53 per share. A year ago, the company and Dale each sold 420,000 shares of the company's common stock through an underwriter for $756,000, or $1.80 per share, according to the prospectus.
Also, Bouchy was one of four lenders who loaned a total of $1.55 million to Gum Tech in October 1995, according to the prospectus.
In December, Dale dissolved and issued 51 percent and 49 percent of its common stock in the company and its loans receivable due from the company to Riverlux Trust REG and Bouchy. The next month, the company repurchased from Bouchy the remaining 619,175 shares of Gum Tech common stock owned by him for $4.50 per share, or $2.5 million total.
Bouchy's brother, Jeffrey L. Bouchy, is listed as secretary, treasurer and chief financial officer of Gum Tech. He joined the company in May 1995, according to the prospectus.
Brett Bouchy and Epert said Jeff Bouchy has a master's degree in accounting and is well-qualified to serve as a company officer.
The firm that underwrote Gum Tech's IPO was Kensington Securities, which is based in Agoura Hills, Calif., and has branches in Scottsdale and New York.
See Sidebar: "Offers for Unitech may delay filing of proposal"
(Copyright 1996 Phoenix Newspapers, Inc.) |
