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The Daily Oklahoman

Apr. 6--It's been a tough year for AMS Health Science Inc., an Oklahoma City-based company that peddles about 60 kinds of diet aids, nutritional supplements and skin care products through a multilevel marketing network.

Despite the company's relentlessly positive outlook, investors keep focusing on the bottom line.

A day after AMS' stock slumped to a new 52 week low, the stock on Tuesday posted the second biggest percentage loss on the American Stock Exchange. Shares dropped 27 cents to close at $2.23 in heavy trading after dipping as low as $2 earlier Tuesday. AMS is down 63 percent this year.

The company has struggled to replace cash generated by its most popular product, an ephedra based diet aid that accounted for more than one third of AMS' net sales in 2003. The Food and Drug Administration banned ephedra a year ago, and AMS is battling four separate lawsuits related to its ephedra products while trying to shift customers to a new weight-loss product.

But AMS President David D'Arcangelo thinks the ephedra ban is yesterday's news.

"We've got something we think is better than ephedra," D'Arcangelo said Tuesday.

The company on Tuesday announced that it is shutting down a free trial program that attracted thousands of new sales associates but squeezed profits.

"Now it's time to transition that momentum to a profitable program," D'Arcangelo said. "We're going to transition the program and try to move the company to profitability."

Investors may be recalling that the company predicted profits more than a year ago.

"Our goal is to ... continue to execute delivering profitability in the first quarter and the year 2004," D'Arcangelo said on March 25, 2004.

AMS turned a small profit in the first quarter last year but couldn't sustain it. With each succeeding quarter worse than the one before, the company lost $6.3 million, more than twice the loss sustained in 2003.

First-quarter 2004 earnings haven't been released, but total sales for March were about $1.3 million, down 7 percent from the previous month.

AMS hasn't lacked for new ideas and strategies. Formerly known Advantage Marketing Systems, it changed its name in August. Last year, AMS began its loss leader free trials program to recruit new sales associates.

Meanwhile, the company also has ventured into the home party sales model, successfully used by companies such as Tupperware and Pampered Chef.

Last month, AMS launched a retail merchant division aimed at placing its products in health food stores, gyms and herb shops. But the retail division is open only to associates willing to train in Oklahoma City and pledge to work full time on the retail program. AMS associates are scattered across North America and most sell AMS products part-time.

In recent months, the company has signed agreements with three firms to develop an infomercial, to seek out new products and investors and to raise the company's profile.

The bevy of new programs are designed to get the company back in the black, D'Arcangelo said. And he knows investors are watching.

"The products we sell, we should make a margin on and then you run your operations right and we want to move the business back towards profitability. That's what the market's responding to," D'Arcangelo said. "The market ultimately wants you to make money, there's no doubt about that."

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