Chairman's Letter

September 24 ,2007

 

Dear Shareholder:

Our fiscal year ends on September 30th   and although I cannot at this time produce any audited results, I can tell you that we will be very close to reaching our projected $1.9 million in Revenue. As I have reported in previous Letters and News Releases, our actual cost of operations (burn) is approximately $150,000 per month or $1.8 million yearly. Thus, we are either very close to break-even or made a small operational profit. In either case this is an event worth noting.

Producing these numbers was not easy and required the collective efforts and talents from our entire staff. To some Shareholders, forming a new Division of Financial Services to earn income while we were producing, tweaking and formatting our products was tantamount to committing a crime. To others it was a very clever, and as it turned out, a company saving business decision. Whatever your opinion, as the commander of the enterprise, my job is to save the company and make it successful, and this I have done.

2007 was a year of trial and errors. While no one ever wants to admit failure, I seriously doubt that anyone can admit that failure was not a part of his or her life; and often it becomes the defining moment that turns everything around. I firmly believe that without failure there can be no success… and thus, I have no fear of failure as such. My biggest fear is that having failed I would not have the capital with which to try again and again and again. The past history of Med Gen clearly tells this story. To our credit we have always managed to find a path allowing us to try again.

Some of our accomplishments are noted. The completion of, not one, but several web sites and landing pages from which purchasing our array of unique products has been made more consumer friendly. Internet business is not easy to capture and we have hired a staff of two to make sure that we are always “optimized”. The production and re-editing of commercials for Painenz®, Snorenz®, Therapedic Innersoles™ and Good Nights Sleep® has either been completed or nearing completion. The airing, testing, tweaking and re-airing of these commercials has started and will continue until December.We believe we will eventually find the illusive combination to penetrate our $170 billion market place. For sure, we have great products! Once again, failure is not an option!

Finally, and under budget, we completed R&D and labeling on Fabulust™, a female sensitivity roll-on (sexual stimulant). Shortly we will announce the completion of the Fabulust™ Internet site and the Infomercial. Also, and worthy of mention is the completion of the R&D on  all-natural Good Nights Sleep®. This was done at the request of an overseas distributor. Mentioning overseas, I will add we have had several successes in Australia and New Zeeland and of-course our share of failures. The failures are attributed to distributors that could not support an advertising program so important to introduce and move product. We have learned that without advertising, nothing sells. In the future our contractual relationships will be limited to those that can produce financial proof of the ability and desire to promote our products.

Some would say that 12 months is too long to prove our worth. In our Industry, 12 months is just getting started. It took 2 ½ years to get Therapeutic Drug Administration approval to ship into Australia. It took over 3 years to get approval to ship into Korea…and so on. Producing drugs, either OTC or Prescription, can take over 5 years from start to marketing and at an average cost of $10 million. We have launched 5 products spending less than $6 million and much of that money was spent on advertising costs. As an example, Snorenz® was in clinical trials for over 1 year. Investing in Pharmaceutical companies and expecting short-term gains is similar to playing Roulette. Frankly, I’m not sure which has better odds for success.

The current Med Gen story is one of a quickly maturing company. Unlike most start-up pharmaceutical companies, we have serious products, fully tested and approved….The last phase, marketing, presents the biggest hurdle and our greatest challenge. Once again, failure is not an option. We are budgeted to spend $1.5 million on advertising during the next 8 months. Our lenders have committed to support this effort to the extent that we ask for it. We recognize that borrowing creates dilution, but when considering the huge potential for revenue, and what is at stake, we have decided to close on a small $350,000 tranche and hope that revenues increase to the point that we can be self supporting, enabling us to repay all loans out of cash flow preventing further share dilution and very possibly put together a stock buy- back program. As long as we continue to borrow, we cannot institute a buy-back program.

The solution to the valuation of our shares seems to be the continuation of our present program of advertising. A successful campaign brings back a multiple of 4. Thus, if we borrow $1 million and get back $4 million, we can pay back the lender, reinvest the balance of $2-3 million into more advertising, and realize $8-12 million in gross revenue. While this example does not accurately take into consideration the cost of advertising, cost of product and other incidental expenses, it does explain the business plan and the solution to our current dilution dilemma.

Without exception, our management feels that we can achieve significant successes in 2008. We have certainly worked hard and still have a lot on our plate in the way of new and innovative products. We are well capitalized, with almost $1 million in cash, to see us thru. While I agree with many that there are companies trading that operate in the gray, Med Gen is not one. We have been transparent and intimate in our communication policies. Our honesty has come into question by only those who have their own agenda to foster and pursue.

To protect our shares and company, we are actively defending ourselves against those that wish us harm, post malicious and baseless degrading comments on blogs and chat rooms and solicit others to pursue similar tactics This activity is prohibited by federal laws. These postings hurt all shareholders. Our shares trade well below any reasonable valuation, creating an unprecedented opportunity for those in search of undervalued companies. The present public evaluation is less than 1/3 the value of our liquid cash position and less than 1/8 of the real value of our company.

New shareholders have a lot to digest when deciding on an investment in Med Gen. Our history and products are available on our Internet Domain, www.medgen.com, please visit us before you make any investment.

Thank you for your interest in our company,

Paul B. Kravitz
Chairman/CEO