Chairman's Letter

February 1, 2008

 

Letter from the Chairman

Dear Shareholder:

Last month I ended my letter with a question…..What’s next? Frankly, I would like to continue on that tack, since as I mentioned previously the pace of our business has increased to the point that there is something of importance happening everyday and often, many times during the day.

Our Vice President of production has just returned from a trip to China with our contract manufacturer with the good news that our Snorenz® will be included as part of an array of products he will be shipping into China. This will give us a leg-up in our efforts to penetrate this very lucrative market. We are also working on getting Good Nights Sleep® approved. We are expecting to commence shipments of Snorenz® in early spring.

Several months ago we talked about Russia and our opportunities there. This too has been finalized and distribution points are now being finalized so that we can start shipping Snorenz® into this very large market. Before I leave the subject of International opportunities, I want you to know that we have been working on several other opportunities, anyone of which can mean substantial business this year.

On the domestic front Snorenz®, Fab U Lust™, Good Nights Sleep® and Painenz® are all being advertised, either via e-mail or TV and the results of this marketing effort will be spelled out in our next filings.

Lastly, our Financial Services Division continues to generate significant income. We are attracting new clients who are asking us to expand our offering of services. At the same time, we are continuing to explore merger/acquisition opportunities that will help grow the company and increase our value. Financially, if you extract the losses caused by our accounting for Derivatives and other non-cash losses, our operations are at or near break-even and our cash-position stands at or near $1,000,000. This liquidity will allow us to pursue our business plan in an aggressive way for the balance of the year.

Dilution will continue as a fact of life until we can eliminate the conversion of debt to equity by our lenders. We are actively exploring financing that can eliminate these conversions but we must be careful not to cause a worsening situation by overloading the company with debt. We still believe that we are very much undervalued by the market and should be trading closer to the real value of our assets plus a multiple of 15 or about $15 million ($0.006). We will continue to explore ways to increase the valuation and we do feel that as the company continues to meet or exceed market expectations it will be significantly rewarded by the markets positive support.

Yours Truly,

Paul B. Kravitz
Chairman/CEO