Chairman's Letter

December 14 ,2007

 

Holiday Message

For those who complain that I sometimes move at a snails pace; a while back Yogi Berra said, “I just don’t want to make the wrong mistake”.

Signing Sunset Thomas to a personal contract is not a mistake at all, but a well planned strategic move to sell a product that should attract a large majority of the 130 million women and men that subscribe to just eight of the popular xxx rated sites on pay per view. Seventy-four percent of these viewers spend more than 2 hours per day, six days per week watching xxx rated shows, eighty-five percent are between the ages of 20 and 40, 27% are couples and 64% are male and maybe you are one.

You bet that Sunset will go for the golden ring and try for her bonus that kicks in after 1 million bottles are sold. Our goal of $25 million in sales for Fab U Lust® during its first year is realistic. This is a market that, unlike the others, is very focused and easy to reach via magazines, radio and TV. The market also lends itself to follow-on products…. and we are already at work on one.

A few months ago I mentioned that we were positioning ourselves in such a way as to direct our strengths towards marketing and sales. That meant raising the capital, producing the shows and booking the commercials. I believe our time and capital have been well spent and our shareholders, who have been patiently waiting (some not so patiently), can expect to see positive results. Even the most vocal of you must recognize that you cannot do business unless you have inventory and resources available.

There is no easy way to explain the complexities and costs of running a small Public company, where every small move is micro-managed, inspected and dissected by shareholders, auditors and federal agencies. Med Gen faces the same regulations (Sarbanes-Oxley) as Pfizer or Wal-Mart. While they have staff’s of people handling these compliance issues, we have no more than two and most times only one, myself. Most investors have a singular interest, make money, buy on the low and sell on the high…. and quickly. We cannot grow that quickly to satisfy those investors and show any substantial increase in the value of our shares. Foolishly, some think that by buying shares on the open market they are somehow funding the company.

Everyone should understand that there is a cost to borrowing money; in our case we have traded share dilution for debt. We are happy to do that because instead of having to use our resources to pay down the debt, we have used those capital resources to build our company, produce new products and now commercialize them. No harm, no foul, because we [do] have great products and great opportunities and it is now our time to make things happen. We are further buoyed, and I have mentioned this many times before, that our lenders, who watch us closely, also believe in our business and expertise… They have invested many millions to prove it.

This Christmas season, while we have a lot to be thankful for, will also serve as a reminder to all, of the resiliency of our great nation and peoples. Faced with terrorism, uncertain economic factors and the coming election, we are able to finance the growth of our company, carrying on the great tradition of America and our ability to sponsor and promote entrepreneurism in its truest form.

 

Happy Holiday,

Paul B. Kravitz
Chairman/CEO