"It was the best of times; it was the worst of times." You may befamiliar with that famous literary phrase from Dickens' classic historicalnovel, A Tale of Two Cities.
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In many ways, the phrase is applicable to the story of Z Trim Holdingsover the past year. Our "tale" is one of simultaneously evolving into atechnology deployment business while establishing credibility in the financialmarkets and righting the repressive and lingering consequences of a priordirection that devalued our core competencies.
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The challenges over the past year were exhilarating, yet sometimespainful. The progress is validating. Our tale is one of lively evolution.
Although we have attached our 2007 annual report, covering the twelvemonths from January 1, 2007 to December 31, 2007, the real story begins latesummer 2007 ...
VISION
Beginning August 20, 2007 our new leadership established a visionary planworthy of both the quality of our products and the steadfast belief among ouremployees, associates and partners, of the increasing value of ourtechnologies. Reborn, our management proceeded the way leadership of a publiccompany should -- establishing an organizational chart that puts shareholdersat the top and, in routine practice, creates a synergistic structure in whichour people and their respective competencies result in a highly effective andcohesive team.
One of the first accomplishments of our new structure was focusing on ourcore competencies and divesting the Company of all things that did notcontribute to such. All resources are now devoted to the deployment of ourrevolutionary technologies -- providing solutions to the food industry throughour functional food ingredients, while expanding and promoting theirversatility and validity in the marketplace.
With clear focus and unrestrained resolve, we approached the industrythrough direct contacts, association networks, innovation exchanges, foodexpositions and previously untapped resources. Receiving very encouragingresponses from the food industry, we set about creating strategicrelationships and sales based on our ability to provide innovative solutionsto heretofore unsolved problems. Our goal: continue to show the industry theunique array of advantages our intellectual and human capital offer whileproviding the highest level of customer satisfaction, all of which isnecessary to every sale.
Through significant market intelligence, we have become more responsive tothe breadth of needs and opportunities we encounter within the food industry,and we continue to develop applications for our products that extend our reachwell beyond the application with which we initially entered the market -- as afat replacer. For example, only Z Trim can add water without "watering down"the texture, enabling quality extensions in product development. Indeed, themulti-functionality and unparalleled water holding capacity of our productpositions it as a superior alternative, in total or in part, to native andmodified starches, as well as a variety of gums, all at varying viscosities.In plain English, we have expanded beyond the specialty low fat aisle to coverthe whole grocery store.
Our technologies provide us the market advantage of adaptability. Theyare so multifunctional that as trends ebb and flow -- whether in the arena offood product development or in the global economy -- we are able to focus onthe particular attributes that have the most resonance with our variousmarkets at any particular point in time. For example, as governments seek tohold companies more accountable with respect to disclosure of ingredients ontheir labels, our custom solutions provide the added values of clean labels aswell as label claims for fiber, calories, cholesterol, trans-fat, saturatedfat and modified food starch. Likewise, with the rising costs of premiumoils, egg whites and other ingredients, we can now create value propositionsfor our food manufacturing customers that deliver at least twice the value ofthe cost of Z Trim. Hence, we bring the benefit of greater economic advantagein the marketplace to our customers. That's a winning formula for innovationin the food industry.
INNOVATIVE TECHNOLOGY, RESEARCH AND DEVELOPMENT
Under prior direction, there was no emphasis on new technology, researchor development. Now, our R&D department is a major strength, providing oursales team with invaluable support in creating innovative product design thatsolves particular challenges faced by our respective customers. Workinghand-in-hand with major food companies, we engage in joint development offinished products that incorporate our technologies. This has had the effectof reducing sales cycle time.
In addition to working on application technology, we are expanding ourportfolio of new products. Significantly, our R&D team has recently developeda new product we call NanoGum(TM) -- soluble dietary fiber derived from cornbran and oat hull. NanoGum is proving to be a game-changer because while itis a viable stand-alone product, it also allows us to design premium customblends with specifically targeted attributes. Created from the same rawmaterials as Z Trim, NanoGum is less viscous (i.e., it is "thinner") thanZ Trim. It is capable, however, of delivering up to half the dailyrecommended dosage of fiber per serving -- more than sufficient for the FDA toallow a fiber claim on the labels of such products. Functioning similar tosome gums, NanoGum has its own attributes, such that when it is blended withZ Trim in varying ratios, it creates a veritable universe of multi-functionality and performance, replete with significant fiber supplementation.In addition to the functional and economic benefits of this innovation, itsprocessing involves converting valuable materials that previous management hadbeen throwing down the drain.
Lastly, we are always improving upon our manufacturing technology.Previously, our manufacturing process was haphazard and unfocused. Now, wehave honed our processes and procedures and made plans to vastly improve ourefficiencies and economies of scale. As we increase our volume of production,we will drive down per unit costs, thereby assuring that our marveloustechnology is indeed driving a viable business.
AGGRESSIVE, TARGETED SALES AND MARKETING
Unlike just over a year ago, we now have a career driven, dedicated salesand marketing team, including keen administrative support. With a significantlevel of combined experience in selling to the food manufacturing market, oursales team, in conjunction with R&D and marketing, is developing numerousmarket applications for the technologies we own.
We're building upon a food industry sales plan that emphasizes sustainedcustomer relationship management and marketing principles founded onnetworking and the generation of news value. Over the past year, we havetapped into professional networks in the areas of food manufacturing, foodscience, school foodservice, culinary service, restaurants and nutrition. Weare combining that networking structure and our established approach tocustomer relationship management with broker and customer partnerships to makethe Z Trim brand known throughout the global food industry. A year ago, ourname recognition among our target markets was minimal and somewhat infamous.By mid year 2009, we will be known throughout our marketplace as a provider ofinnovative and technology-driven solutions.
While the sales numbers from the nine month period of January throughSeptember of 2007 and 2008 respectively indicate improvement in 2008 over2007, the real story is in how succinctly they reflect the success of ourshift toward becoming a solutions provider to the food industry.
In 2007, sales to consumers on the internet over our "on-line" storecomprised almost 42% of our total. In 2008, our shift away from this morecostly sales channel resulted in sales from the on-line store totaling only 5%of total sales for the period. That shift took place in less than a year,primarily reflecting revenues generated by our concentration on sales ofZ Trim to the food industry and away from consumer sales of Z Trim, dressingsand fiber supplements. Most notably, these revenues from sales to the foodindustry are based upon sustainable business. Our sales revenue shows steadyincreases from Q1 through Q3.
RESPONSIBLE MANAGEMENT BASED ON SOUND BUSINESS PRINCIPLES
As of August of last year, there was minimal budgeting and planning, andno meaningful costing evaluations had been undertaken. The Company hadunaddressed regulatory deficiencies, significant pieces of litigation pending,and had managed to alienate virtually every industry participant that we hadcome in contact with.
Since January 2008, we improved management and finances substantially aswe:
We have created a business plan, crafted out of strategic thought, toserve as the roadmap for all Company activities. As a result, we are notlikely to see again the types of extraordinary legal and accounting expenseswe had seen previously. We are now focused on spending in the direction ofprofitability, with all expenditures aimed at positively impacting the bottomline and getting a return on all investment. We will further improve upon ourburn rate because we will continue to increase revenues via sales at prices inexcess of our costs to produce.
We remain committed to quality assurance, food safety and reliability. Infact, within the past year our plant and standard operating procedures havepassed two significant inspections, one from the American Institute of Bakingand another from one of the top five food processors.
We are a much stronger, more valuable company today than we were onAugust 19, 2007. That value has not yet translated into share price. Withsound business plans now in place, we require working capital to execute them.Our continued progress demands that we go to the financial markets to raisefunds for working capital -- capital which comes at a steep cost in thesetrying financial times. As we do so, in keeping with our themes oftransparency and accountability, we are implementing a responsible investorrelations program that communicates to the investment community our progressin executing our plans.
PRUDENT COUNSEL
We unshackled ourselves from the resource draining bonds of litigationbegun prior to our new direction. As the bitter echoes from a competitorinvolved in one such encounter fade now from irrelevance into absurdity, welook forward to proving the vast superiority of our technologies and ourapproach in the marketplace.
As we right-sized our operation, we also sought the right fit as regardsthe trading environment for our stock. Issues with respect to regainingcompliance and good citizenship on the American Stock Exchange occupiedsignificant resources over the past year. Upon a detailed assessment of thecosts and benefits, our management and board unanimously determined that ourresources were better allocated as a member of the OTC bulletin board. Wewill revisit the issue of a listing on a public exchange when the benefitsclearly outweigh the costs.
"It is a far, far better thing that I do, than I have ever done ..."Charles Dickens, A Tale of Two Cities
Z Trim's tale continues. What does the future hold? We anticipate thetrend of increasing sales will continue. We anticipate deploying newapplication, manufacturing and waste-reduction technologies. We anticipatefurther reductions in our monthly burn. We anticipate the expansion of ourglobal market. In sum, we anticipate bright futures for our Company, ouremployees, our customers and business partners, and most importantly, you, ourvalued shareholders.
We look forward to seeing you at our annual shareholders' meeting onDecember 30, 2008.
DISCLOSURE NOTICE: The information contained in this letter is as ofDecember 4, 2008. The Company assumes no obligation to update anyforward-looking statements contained in this letter as a result of newinformation or future events or developments.
This letter contains forward-looking information about the Company'sfinancial results and estimates, potential profitability, business plans andprospects, our technology, in-line products and product candidates and aproposed reverse split of the company's issued and outstanding common stockthat involve substantial risks and uncertainties. You can identify thesestatements by the fact that they use words such as "will," "anticipate,""estimate," "expect," "project," "intend," "plan," "believe," "target,""forecast" and other words and terms of similar meaning in connection with anydiscussion of future operating or financial performance or business plans andprospects. These statements reflect our current views with respect to futureevents and are based on assumptions and subject to risks and uncertainties.Given these uncertainties, you should not place undue reliance on theseforward-looking statements. Among the factors that could cause actual resultsto differ materially are the following: our ability to raise needed funding onsatisfactory terms and in a timely basis, our ability to achieve and maintainpositive gross margins, market acceptance of our products, the success ofresearch and development activities; and other matters that could affect theavailability or commercial potential of our products; the speed with whichproduct launches may be achieved; the success of external business developmentactivities; competitive developments; the ability to successfully market bothnew and existing products; difficulties or delays in manufacturing; claims andconcerns that may arise regarding the safety or efficacy of in-line productsand product candidates; legal defense costs, insurance expenses, settlementcosts and the risk of an adverse decision or settlement related to productliability, patent protection, governmental investigations, and other legalproceedings; the Company's ability to protect its patents and otherintellectual property both domestically and internationally; governmental lawsand regulations affecting domestic and foreign operations, including taxobligations; changes in generally accepted accounting principles;uncertainties related to general economic, political, business, industry,regulatory and market conditions; any changes in business, political andeconomic conditions due to actual or threatened terrorist activity in the U.S.and other parts of the world, and related U.S. military action overseas;growth in costs and expenses;; and our ability to realize the projectedbenefits of our cost-reduction initiatives. A further list and description ofrisks, uncertainties, and other matters can be found in the Company's AnnualReport on Form 10-KSB/A for the fiscal year ended December 31, 2007, and inits reports on Forms 10-Q and 8-K.
Contact: Angela Strickland of Z Trim, +1-847-549-6002(Photo: http://www.newscom.com/cgi-bin/prnh/20081209/AQTU538) December 2008 Dear Fellow Shareholders:
SOURCE Z Trim Holdings, Inc.
