UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
MED GEN, INC.
(Name of Small Business Issuer in its charter)
NEVADA 65-0703559
(State of incorporation) (I.R.S. Employer
Identification No.)
7284 W. Palmetto Park Road, Suite 106, Boca Raton, Florida 33433
(Address of principal executive offices) (Zip code)
Issuer's telephone number (561) 750-1100
Securities to be registered pursuant to section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock $.001 Par Value
(Title of Class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Company Background
Med Gen, Inc. (the "Company") was established under the laws of the State
of Nevada in October, 1996. Executive offices are located at 7284 W.
Palmetto Park Road, Suite 106, Boca Raton, Florida 33433. The Company's
phone number is (561) 750-1100. The Company currently operates three
websites: www.medgen.com, www.medgensolutions.com and www.SNORenz[R].com.
The Company's common stock trades on the OTC Bulletin Board under the
symbol "MGNI."
The Company was established to manufacture, sell and license products
that promote a healthy lifestyle. In early 1997, the Company completed a
research and development program which led to the formulation,
manufacture and production of 20 products dealing with common health and
nutritional maladies. These products combined vitamins, herbs and
minerals and were formulated for use as part of a preventive care
lifestyle. At the same time, the Company had initiated testing and
studies on its primary product, SNORenz[R]. Lacking the capital necessary
to successfully market the entire line of products and due to the costs
associated with entering the retail markets in the health and nutrition
industry, the Company opted to concentrate its entire resources, both
capital and management, on the launch of the SNORenz[R] brand.
Initial development of the SNORenz[R] product was completed in the spring
of 1997, when several test infomercials were produced and aired with
limited success. Changes were then made in the formulation, the label
design and the spray applicator. The newly designed product was
introduced in the fall of 1998, and sales grew modestly until an
infomercial featuring the Company Chairman and Chief Executive, Paul B.
Kravitz, began airing in the Spring of 1999, significantly increasing
sales. The Company abandoned plans to market its line of vitamin and
nutritional supplements and natural health remedy products at the end of
1998, and wrote-off its remaining related inventory.
During 1999, the Company reviewed several potential new products and
acquired marketing rights for three product lines dealing with aches and
pain, allergy relief, and deflection of electromagnetic radiation emitted
from cellular telephones.
Products
SNORenz[R]
SNORenz[R] is an innovative entry into the anti-snoring industry. The
medical and psychological communities have studied the causes and
symptoms of sleep deprivation for many years. Sleep clinics can be found
internationally at the largest hospitals and universities, and there is
a large body of published work on the subject of snoring.
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It has been documented in clinical tests that much of sleep deprivation
is caused by snoring. Not only is the snorer disturbed, but those who are
within earshot of the noise are disturbed as well. As the muscles relax
during sleep, air flows in and out of the mouth causing the vibration of
the tongue, soft palate and uvula which produces the sound commonly
referred to as snoring. Traditional snoring remedies include surgical
procedures, devices and appliances. During surgery, portions of the
vibrating tissue are cut away by scalpel or laser in an attempt to remove
the noise making tissues. This type of procedure is painful, may take
months to heal, and may not offer a long-term solution. Mechanical
devices primarily attempt to increase the volume of air or create
positive air pressure using some type of breathing apparatus connected to
an air pump. This is not only uncomfortable, but also limits ones
sleeping positions. Dental appliances also attempt to increase the volume
of air by expanding the opening of the mouth or by repositioning the
lower jaw and/or the tongue to decrease the vibration effect. Again,
wearing one of these is not the most comfortable way to sleep. The costs
of these methods can be considerable and may not be covered by basic
medical insurance programs.
Snoring is a problem that affects over 50% of males and 40% of females.
In the United States alone, it is documented that there are over 94
million people who suffer with and from the effects of snoring. Snoring
causes a poor quality of sleep. Although the medical implications of
snoring usually are not life threatening, therapy has been increasing in
demand to solve the side effects.
Experiments with weight loss, the avoidance of alcoholic beverages and
the changing of sleep positions have largely proven ineffective. More
aggressive methods are now being sought by sufferers who demand some
relief. Invasive surgery, continuous positive airway pressures, or
appliances are now being used. These methods have had variable success
in improving the quality of sleep and reducing snoring. Due to the
discomfort and cost of these methods, less invasive methods are now being
evaluated.
One of the most promising of all these new methods is the use of a
natural blend of oils and vitamins specially formulated to be used as a
spray. After years of research, such a product was developed by a
medical specialist in Brazil with amazing positive results. The Company
acquired this technology, the trade secrets and proprietary formula for
world wide commercial marketing. The Company has further improved the
delivery of this spray by using the patented technology called
Lipoceuticals, which enable the blend of oils to remain equally disbursed
and suspended in solution. In other words, there is never a need to shake
the bottle as the solution is always "mixed up." Using this same
technology and delivery system, The Company intends to market other over-
the-counter products.
By way of explanation, Lipoceuticals are liposomes in a multiphase system
that contain an active ingredient in each phase. The ability to
encapsulate a variety of lipophilic and hydrophilic ingredients, peptides
and proteins are the obvious advantage needed to enhance delivery improve
quality and product performance of SNORenz[R]. This technology is far
superior and much more expensive than other emulsion type delivery
systems and insures the highest possible quality available in the market
today. The advantages and benefits of this technology and delivery system
are that LipoSpray is absorbed transmucosally to provide systemic
distribution; has a higher concentration of active ingredient in the
mucosal tissue; has longer residence time of active ingredient in the
mucosal tissue and has a high encapsulation rate for improved performance
of the active ingredient. It also has greater bioavailability,
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which means that it has faster onset of effect, greater overall
absorption, sustained administration, improved convenience and no pills,
water or swallowing problems.
SNORenz[R] attempts to reduce or eliminate the sounds associated with
snoring by simply lubricating the vibrating tissues in the throat with a
combination of five natural oils, vitamins, and trade secret trace
ingredients. The product is formulated to adhere to the soft tissues in
the back of the throat for up to 6 to 8 hours per application, and may be
reapplied as needed. Sleep clinic and double blind studies and scores of
testimonials indicate a high level of success for SNORenz[R] users.
SNORenz[R] is not effective where users have consumed a large amount of
alcoholic beverages shortly before application, as the alcohol tends to
break down the chemical bonds of the natural oils. SNORenz[R] carries a
30-day money back guarantee and the Company experiences return rates of
less than 7%.
PAINenz[TM]
PAINenz[TM], a recently developed product, is a topical analgesic over-the-
counter product that significantly reduces the pain common to arthritis
sufferers, normal aches and pains due to exercising and other muscle
stress, simple backache and sprains. The product comes in a roll-on
applicator. The market for over-the-counter pain relief products is
estimated to exceed $2.5 billion per year.
The active ingredient in PAINenz[TM] is Capsaicin (kap SAY ih sihn), a
derivative of the hot pepper plant. When applied as an external
analgesic, Capsaicin depletes and prevents reaccumulation of substance P
in peripheral sensory neurons. Substance P is found in slow-conducting
neurons in the outer and inner skin layers and joint tissues, and is
thought to be the primary chemical mediator of pain impulses from the
periphery to the central nervous system. By depleting substance P,
Capsaicin renders skin and joints insensitive to pain since impulses
cannot be transmitted to the brain.
Capsaicin has been approved by the United States Food and Drug
Administration ("FDA") for use without a prescription in topical
preparations marketed for the temporary relief of pain from arthritis, or
for the relief of minor aches and pains of muscles and joints. Voluminous
information on both Capsaicin and Liposomes is available on the Internet.
"Sneeze No More"
The Company has acquired certain marketing, sales and distribution rights
for a product called "Sneeze No More", which is designed to control
allergens from pet dander, dust mites, cockroaches, plants, and mold and
mildew in the home and work environment. Instead of treating the symptoms
- - watery, red and itchy eyes, sniffling, stuffy nose, sneezing, etc. -
this product suppresses the allergens in the environment. The Company has
recently prepared and aired a test infomercial for this product and is
experiencing limited sales based upon this and its website.
WaveGuard[TM]
The Company has begun marketing plans for WaveGuard[TM], a two piece
protector applied to any cell phone. WaveGuard[TM] will filter out a
majority of the radiation present in all cell phones by shielding the ear
piece from the brain, and dampening emissions from the antenna, without
affecting the quality of transmission.
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This product will address the concerns of potential brain tumors caused
by the electromagnetic radiation emitted by cell phones, a topic of
recent media reports. For over 20 years, scientists have been trying to
determine whether electromagnetic fields (EMF) increase the risk of
cancer. Last June, a panel convened by the National Institute of
Environmental Health Sciences decided that there was enough evidence to
consider EMF as a "possible human carcinogen", although federal funds
have not yet been allocated for any purpose. The Company has recently
begun limited marketing of this product.
Distribution Agreement
SNORenz[R] and PAINenz[TM] are manufactured for the Company by Innovative
Chemical Corporation ("ICC"), Buffalo, NY with which the Company has a
distribution agreement. ICC and the Company share patent rights to the
formulas.
Sales and Distribution
Managed and sustained growth are goals that the Company has set for
itself. Under a three phase marketing plan, each new product will enter
the market at price points to allow maximum profit potential, while at
the same time set the stage for the next phase which will step down in
price points as the market and market share increases. In the final
retail phase, price points will be established to allow penetration into
various segments of the market to provide ongoing growth as new retailers
are added and new territories are opened.
In less than two years, the Company has demonstrated the value of its
three phase marketing strategy with SNORenz[R]. Initially, product
introductions and test marketing were conducted primarily through radio
and TV infomercials in specific geographic regions. Secondly, limited
national infomercial exposure increased sales by offering "deluxe" and
"value" packages. And now, phase three has begun as the product is
gradually introduced into retail stores at further reduced price points.
The Company has increased its production capacity and established
inventory for a national launch of its flagship SNORenz[R] product.
Additionally, the Company subdistributes SNORenz[R] to Nutrition For Life
International, Inc. for distribution in the United States under the brand
name Snoreless and for distribution in Canada under the name Quiet
Nights.
The Company intends to build strong brand awareness and brand loyalty
during its marketing cycles. And, since SNORenz[R]has a 21-30 day re-order
cycle for the most popular 2-ounce spray bottle size, it has become
important to create an easy re-purchase opportunity for the consumer.
This is one reason why management has decided on an early entree into the
retail market. The product and brand awareness created by both television
and radio commercials has created demand at the retail store level.
SNORenz[R] is now available in approximately 5,000 retail outlets.
Prime Retail Outlets
Albertsons, Amway Corporation, Arcara Marketing Group, Arrow Corporation,
Bartell Drugs, Brooks Pharmacy, Castellone's Pharmacy, DNA Pacifica,
Discount Drug Market, Eckerds Corporation, Family Pharmacy, Fedco, Inc.,
Discount Pharm, Greenfield Pharmacy, Hannaford Retail Services, Save
Pharmacy, Healthy FX, Heritage
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Prod. & Supplies, Hillsboro Pharmacy, JFC Sales, McKesson Drug Co.,
Natural Products & Dev., Neuman Wholesale, Passion For Life (United
Kingdom), Preferred Pricing Plus, Remo Drug, Spectrum Innovations, Stop
& Shop, Tru-Vantage International, Vello Scandinavia (Denmark), Vogue
Canada (Canada), Wakefern Food Corp.(Shop Rite), Windsor Hill Inc.,
Washington Drug, Yosemite Wholesale Co. (Save Mart), Ziglar Marketing
Group.
Marketing
Management has introduced a four-step approach as it enters the retail
market. Each segment will carry its own directed marketing approach,
complete with a co-op advertising campaign, ad slicks, and display units
designed for placement in high traffic areas to target impulse buying.
To fully implement this strategy, the Company will seek an experienced
and accomplished sales and marketing director responsible for the day to
day contact with accounts, creating product awareness, overseeing an
orderly rollout and growth of product sales, and building long term
relationships to pave the way for line extensions and market stability.
This individual will also be responsible for monitoring the activities of
the 52 independent distributors and commissioned representatives that
currently sell the Company products in various territories throughout the
United States.
The Company has set up a new division called Med Gen Solutions ("MGS"),
that will produce, test, and market infomercials on suitable company
products. Prior to this, the company has relied upon selling its products
to others that, in turn, produce and air infomercials.
During 1999, the Company penetrated the retail market in the United
Kingdom with sales averaging 18,400 bottles per month since February, and
with projections that this level of orders will increase 5% to 10% per
month over the next year. Sales in the United States have grown primarily
due to the successful marketing campaign spearheaded by the Tru-Vantage
infomercial programs which have aired on over 300 stations nationally.
Current distribution and marketing efforts for the SNORenz[R] product are
broken down into the five key areas of distribution described below.
Other products will follow a similar course.
Electronic Media: The Company had entered into an exclusive world
wide sales and marketing agreement with Tru-Vantage International, Inc.
("TVI"), a division of Nightingale-Conant, Inc. However, with the recent
separation of Kevin Trudeau, TVI's Chairman, from Nightingale-Conant, the
exclusivity of the agreement has terminated. For this reason, the Company
formed the MGS division to produce and air its own infomercials. The
first of the MGS- produced infomercials began airing on a limited test
basis in late September of 1999, for SNORenz[R]. The production of a
PAINenz[TM] and a Sneeze No More infomercial is near completion. In
addition, a series of 60-second spots featuring SNORenz[R] are now being
aired nationally on radio. An infomercial for WaveGuard[TM]is in pre-
production.
Retail Distribution: The Company distributes SNORenz[R] through the
United Kingdom based Passion For Life, Ltd., a marketer of natural health
and organic products. Passion For Life distributes to drug and health
food stores throughout the United Kingdom and Ireland, and with Company
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approval, may distribute in other countries throughout the European
continent and Scandinavia.
In England, SNORenz[R] is the largest selling product in the "anti-
snoring" drugstore category. Not including international sales generated
from its Internet site, the Company has distributors which sell SNORenz[R]
in Canada, the United Kingdom, Australia, Iceland, Norway, Finland,
Sweden, Germany, Japan, Korea, Denmark, and the Netherlands. The Company
fully expects to be able to piggyback additional products through this
distribution network.
Retail Stores - USA: The SNORenz[R] product is currently available in
retail stores, including Bartell Drugs, Brooks Pharmacy, Castellone's
Pharmacy, Discount Drug Market, Eckerd Corporation, Family Meds, Genovese
Drug, Giant Eagle, Jewel Stores, Jewel T Stores, McKesson Drug Co., Osco
Drugs, Remo Drug, Sav-On Drugs, Shop Rite, Stop & Shop, Washington Drug,
and others. Shipments began to Albertson's in September of 1999, and the
first shipment to Phar-Mor was in October. Several others are expected to
come on line in the first half of 2000 (see "Prime Retail Outlets").
Catalog and Multi-level Marketing: The Company has entered into an
agreement with Nutrition For Life, Inc., ("NFLI") a multi-level marketing
firm, to sell the SNORenz[R] product under the "Snoreless" private label
brand name. The license agreement also permits NFLI to use the Silent
Night label in Canada, which is a registered trademark of NFLI. The
Company has recently completed negotiations with AMWAY Corporation on a
boxed multi-bottle package for distribution in their multi-level
marketing channels. The product will be introduced in their January 2000
catalog under the SNORenz[R] brand name. SNORenz[R] is also available in
catalogs published by Independence Distribution Company, Lifestyles
Fascination, Inc., and TransAmerica Holdings, LLC.
Private Label: The Company has entered into a license agreement
with Nutrition For Life, Inc., ("NFLI") a multi-level marketing firm, to
sell the SNORenz[R] product under the "Snoreless" private label brand name.
The license agreement also permits NFLI to use the Silent Night label in
Canada, which is a registered trademark of NFLI. The Company has recently
completed negotiations with AMWAY Corporation on a boxed multi-bottle
package for distribution in their multi-level marketing channels. The
product will be introduced in their catalog in January 2000.
Internet Sales: In July, 1999, the Company updated its web site,
www.SNORenz[R].com, to make it E-commerce compliant, which means the Company
can now accept secure credit card purchase orders directly over the
Internet. The Company has spent very little money promoting this web
site, but orders are averaging about $12,000 per month in retail sales.
The Company has completed the process of updating its www.medgen.com web
site and its new www.medgensolutions.com website, both of which will
feature all of the Company's products and offer links to the SNORenz[R]
site as well as any future sites the Company may develop.
Competition
Historically, the anti-snoring industry has relied upon surgical
procedures and appliances to control the sounds caused by snoring. There
are hundreds of products listed on the Internet that claim to be
effective in curing or reducing the noise of snoring. Very few of these
products can back up their claims with acceptable clinical studies.
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Some of these products come in the form of pills, ear muffs and nose
tapes. Management of the Company is aware of only one other "copy cat"
product that is applied as a mouth spray, which retails for one-third
more than SNORenz[R] and is not presently available in retail stores.
Dominant Customers
In fiscal year 1999, the Company's three largest customers were Tru-
Vantage International, Inc., Nutrition For Life, Inc. and Passion For
Life, Inc. These three accounts represent over 70% of the distributors
and accounted for 86% of the Company's gross revenues in fiscal 1999.
Patents, Trademarks and Licenses
An application for patent of the revised "Anti-Snoring Composition" of
SNORenz[R] was filed on October 29, 1998 (Serial No. 60/106,120) and as
such, the Company has the right to place "patent pending" when referring
to the SNORenz[R] product. The name "SNORenz[R]" is a registered trademark of
the Company with the United States Patent and Trademark Office (Reg. No.
2,210,381 - 12/15/98). An application for trademark of the name
"PAINenz[TM]" has been made. The Company has also taken steps to trademark
its product names and safeguard its formulations internationally through
the law firm of Zellermayer, Pelossof & Schiffer, London, England.
Government Regulation
The manufacturing, processing, formulation, packaging, labeling and
advertising of the Company's products may be subject to regulation by one
or more federal agencies, including the FDA, the Federal Trade Commission
("FTC"), the Consumer Product Safety Commission, the United States
Department of Agriculture, the United States Postal Service, the United
States Environmental Protection Agency and the Occupational Safety and
Health Administration. The Company's products may also be regulated by
various agencies of the states and localities in which our products will
be sold. In particular, the FDA regulates the safety, labeling and
distribution of dietary supplements, including vitamins, minerals, herbs,
food, OTC and prescription drugs and cosmetics. The regulations that are
promulgated by the FDA relating to the manufacturing process are known as
Current Good Manufacturing Practices ("CGMPs"), and are different for
drug and food products. In addition, the FTC has overlapping jurisdiction
with the FDA to regulate the labeling, promotion and advertising of
vitamins, OTC drugs, cosmetics and foods. The FDA is generally prohibited
from regulating the active ingredients in dietary supplements as drugs
unless product claims, such as claims that a product may heal, mitigate,
cure or prevent an illness, disease or malady, trigger drug status.
Governmental regulations in foreign countries where the Company may sell
our products may prevent or delay entry into a market or prevent or delay
the introduction, or require the reformulation, of certain of our
products. In addition, the Company cannot predict whether new domestic or
foreign legislation regulating its activities will be enacted. Such new
legislation could have a material adverse effect on the Company.
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Research and Development
The Company routinely does testing on SNORenz[R] and all its products.
Although the Company completed a blind study under the direction of Dr.
Robert Currier in Michigan in 1997, it has now commissioned another study
by Clinical Research Laboratory, New Jersey. Management believes that
this study will fortify the claims made for the product by the Company.
By Company policy, no claims will be made about any of the Company's
products without first undergoing several tests to assure the validity of
the claims made.
Year 2000 Impact
The year 2000 issue is the result of information technology systems and
embedded systems (products that are made with microprocessor computer
chips) such as personal computers using a two digit format as opposed to
a four digit format to indicate the year. Such information technology and
embedded systems may be unable to properly recognize and process date-
sensitive information after January 1, 2000, although to date, the
Company has experienced no such problems. This could result in system
failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Company and its subsidiaries underwent a thorough overhaul and
upgrading of its technology systems prior to year-end 1999. All available
software updates and patches were downloaded and installed in the
Company's computers. In addition, technical personnel from the National
Institute For Telecommunication Education Corp. are constantly monitoring
the systems assuring the highest degree of performance and accuracy.
No discernable disruptions or glitches occurred to the Company's systems
or its sub-contractor's systems after January 1, 2000, and the Company
did not have to rely on contingency plans to conduct its normal
operations due to potential Y2K or associated problems.
Reports to Security Holders
The Company periodically prepares and publishes New Releases and other
significant reports that are of significant noteworthiness. These reports
are sent to Business Wire for wide distribution. In addition, shareholder
reports are mailed to all shareholders as the company deems necessary.
These reports or messages discuss events that the Company deems
noteworthy.
Notices of yearly shareholders meetings, proxy statements and events of
this nature are distributed with the help of Liberty Transfer Company,
the Company's transfer agent, and with information obtained from ADP
Investor Communication Services in regard to street name accounts.
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Employees
The Company currently has seven full-time employees. Paul Kravitz is the
Chief Executive Officer of the Company, Paul S. Mitchell is its President
and Secretary/Treasurer and Stephen M. Corriher is its Chief Financial
Officer. The Company has not entered into employment agreements with
Messrs. Kravitz, Mitchell or Corriher. The Company will gradually add
administrative, sales, operations and marketing staff to support the
expansion plans as outlined.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
General
The Company presently is headquartered at 7284 W. Palmetto Park Rd.,
Suite 106, Boca Raton, Florida 33433, In August, 1999, the Company signed
a new lease to occupy a 4,500 sq. ft. facility located at the above
address, and took occupancy of the space on December 10, 1999. The
increase in business and the need for additional storage space and
offices for employees necessitated this move (see "Description of
Property".)
The Company has elected to sub-contract all of the manufacturing of its
products, and can, under certain conditions, add additional manufacturing
facilities anywhere in the world should the need arise due to "acts of
god", expansion of production requirements, and other reasons.
Results of Operations
The Company's financial results are dependent on a variety of factors,
including the general strength of the economy, both domestic and
international. The Company is still considered an "early stage company"
and although there has been significant growth during the years 1997,
1998 and 1999, the growth was attributed to one brand, SNORenz[R] (see
"Products".)
During the start-up year of 1997, the Company had sales of $5,203,
$247,847 in 1998 and $1,403,516 in 1999. The Company lost $176,070 or
$.062 per average share for the fiscal year ending September 30, 1999.
$116,000 of this loss is due to an income tax adjustment for a tax
benefit taken in 1998 and expenses in 1999. The remaining $60,070 loss is
largely attributable to one time start-up costs, the partial funding of
the Med Gen Solution division, and the production costs associated with
the SNORenz[R] and Sneeze-No-More 30-minute infomercials. In addition, the
source of the Company's major business, its contractual arrangement with
TVI, expired on September 30, 1999. Because of internal restructuring
with TVI, business with TVI was temporarily curtailed. In November, 1999,
the Company and TVI resumed business on a non-exclusive basis.
In the first quarter of 2000, several events should take place which
management believes will increase profits for the Company. First,
Nightengale-Conant Corp. has agreed to invest significant sums to air the
SNORenz[R] 30 minute infomercials under its ownership of TVI. Second, Kevin
Trudeau, previously chairman of TVI, has acquired a television channel in
Australia and has advised management that it will run, as a major
product, SNORenz[R] and our other products. Kevin Trudeau also expects to
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e-introduce a new version of the SNORenz[R] infomercial into other
markets, which will include the United States. Third, in order to improve
the mix of Company-direct sales that eliminate the middleman and thereby
increase profit margins, MGS has successfully tested its new SNORenz[R]
infomercial and on December, 10 1999, it began airing in major television
markets. Fourth, new distributors are being added to the MGS network,
thereby increasing the amount of independent advertising. Fifth, web site
revenue has already increased to $12,000 per month for the three-month
period of September, October, and November. This trend should continue and
increase during 2000, as potential buyers hear or see the word "SNORenz[R]"
and type in www.SNORenz[R].com on their computers. Sixth, new markets, both
at home and abroad, are opening at an increasing pace.
In the first quarter of 2000, at least one new product (PAINenz[TM]) is being
introduced into established channels in the United States, with
international sales to follow later in the year. Two more products
(Sneeze-No-More and WaveGuard[TM]) are slated for domestic roll out in the
second calendar quarter. MGS is now in the process of airing and testing
three new infomercials. The infomercials are expected to significantly
and positively affect the Company's revenue and profits during the next
fiscal year.
Gross revenues for the 12 month period ending September 30, 1998 were
$247,847 as compared to gross revenues of $1,403,516 for the same period
in 1999. This increase is primarily due to the introduction of SNORenz[R]
on national television during the months of June, July, and August after
an extensive period of testing and re-testing that took place in the
first quarter of the year. Total operating expenses for the 12 months
ending September 30, 1998 were $1,081,253 as compared with $777,546. This
significant reduction in operating expenses was primarily due to those
expenses related to start-up (one time expenses), research and
development, and a reduction in salary and general overhead costs. In a
similar comparison, Gross profits rose from $148,833 to $723,288.
Thus, the Company progressed from its first year of operations and a net
loss of $814,480 to a net loss of $176,070 in its second year of
operations.
Liquidity and Capital Resources
The Company has not had any cash flow problems. To the extent that
operations and sales remain steady and the increased sales emanating from
the six avenues of revenue mentioned previously occur, the Company will
continue in a cash positive position. Thus, because of expected
profitable operations, additional lines of credit from its vendors, and
a $50,000 revolving line of credit from its prime banker, the Company
will completely fund its operations for the foreseeable future.
Risk Factors
Management believes that the Company is subject to the following risks:
Limited Operating History. The Company was established in October of
1996 and has had a very limited operating history. The Company is subject
to all the risks inherent in any newly formed business including the
absence of a significant operating history, lack of market recognition
and limited banking and financial relationships. Furthermore, no
assurance can be given that operating profits will be realized in the
future.
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Competition. Historically, the anti-snoring industry has relied upon
surgical procedures and appliances to control the sounds caused by
snoring. There are hundreds of products listed on the Internet that claim
to be effective in curing or reducing the noise of snoring. Very few of
these products can back up their claims with acceptable clinical studies.
Some of these products come in the form of pills, ear muffs and nose
tapes. Management of the Company is aware of only one other "copy cat"
product that is applied as a mouth spray, which retails for one-third
more than SNORenz[R] and is not presently available in retail stores.
There can be no assurance that the Company will be successful in meeting
its competition.
Uncertain Ability to Manage Growth. As part of the Company's business
strategy, the Company intends to pursue rapid growth. The Company's
ability to achieve its planned growth depends upon a number of factors,
including its ability to hire and train management and other employees,
the adequacy of its financial resources, its ability to identify new
markets in which the Company can successfully compete and its ability to
adapt its purchasing and other systems to accommodate its expanded
operations. In addition, there can be no assurance that the Company will
be able to achieve its planned expansion or that the Company will be
able to manage successfully the expanded operations. Failure to manage
growth effectively could adversely affect its financial condition,
results of operations and prospects.
Raw Materials and Supplies. Most of the raw materials that the
Company will be using in its products will be obtained from third-party
suppliers. Although the Company believes that all of its sources for raw
materials will be reliable, any interruption of such supply could have a
material adverse effect on its business.
Patents. While the Company has applied for a patent on its SNORenz[R]
product, there is no assurance that a patent will be obtained, which may
affect the competitiveness of the product.
Product Liability Claims. The Company, like other manufacturers,
wholesalers, distributors and retailers of products that are ingested,
faces an inherent risk of exposure to product liability claims if, among
other things, the use of its products results in injury. The Company has
product liability insurance in amounts it believes is adequate for its
operations. There can be no assurance, however, that such insurance will
continue to be available at a reasonable cost, or if available, will be
adequate to cover all liabilities.
Dependence on Key Management. The Company's further performance depends
substantially upon the continued services of its senior management and
other key personnel. Because the Company has a relatively small number
of managerial employees, its dependence on retaining its managerial
employees is particularly significant. The Company's success will
depend, in part, on its ability to attract and retain qualified
management and professional personnel. Competition for such personnel in
the health care industry is intense. In addition, there can be no
assurance that its current employees will continue to work for the
Company. The loss of the services of certain of its key employees
could adversely affect its operating results or financial condition.
12
<PAGE>
Reliance upon Licensees for Sales. The Company has entered into
agreements with licensees for the sale of certain of its products. The
Company selects licensees primarily by evaluating their ability to
successfully to market and distribute its products. There is no
assurance that the licensees will be successful in the marketing of its
products.
Dominant Customer. In fiscal year 1999, the Company's three largest
customers were Tru-Vantage International, Inc., Nutrition For Life,
Inc., and Passion For Life, Inc., which represented over 70% of the
Company's distributors and accounted for 86% of Company's gross revenues.
Loss of any one of these customers would seriously affect the Company's
business.
Government Regulation. The manufacturing, processing, formulation,
packaging, labeling and advertising of the Company's products may be
subject to regulation by one or more federal agencies, including the FDA,
the FTC, the Consumer Product Safety Commission, the United States
Department of Agriculture, the United States Postal Service, the United
States Environmental Protection Agency and the Occupational Safety and
Health Administration. The Company's products may also be regulated by
various agencies of the states and localities in which its products will
be sold. In particular, the FDA regulates the safety, labeling and
distribution of dietary supplements, including vitamins, minerals, herbs,
food, OTC and prescription drugs and cosmetics. The regulations that are
promulgated by the FDA relating to the manufacturing process are known as
Current Good Manufacturing Practices ("CGMPs"), and are different for
drug and food products. In addition, the FTC has overlapping jurisdiction
with the FDA to regulate the labeling, promotion and advertising of
vitamins, OTC drugs, cosmetics and foods. The FDA is generally prohibited
from regulating the active ingredients in dietary supplements as drugs
unless product claims that a product may heal, mitigate, cure or prevent
an illness, disease or malady, trigger drug status. Governmental
regulations in foreign countries where the Company may sell our products
may prevent or delay entry into a market or prevent or delay the
introduction, or require the reformulation, of certain of our products.
In addition, we cannot predict whether new domestic or foreign
legislation regulating its activities will be enacted. Such new
legislation could have a material adverse effect on the Company.
Effect of Adverse Publicity. The Company is highly dependent upon
consumers' perceptions of the overall integrity of its business, as well
as the safety and quality of its products and similar products
distributed by other companies which may not adhere to the same quality
standards. The Company could be adversely affected if any of its products
or any similar products distributed by other companies should prove or be
asserted to be harmful to consumers or should scientific studies provide
unfavorable findings regarding the effectiveness of its products.
Dividend Policy. In order to expand, the Company will need the maximum
working capital. Therefore, the Company does not expect to declare or
pay any dividends in the future, but instead the Company intends to
retain all earnings, if any, to expand its operations. The payment of
dividends, if any, is at the discretion of its Board of Directors and
will depend upon its earnings, if any, in the future, its capital
requirements and financial condition, and other relevant factors.
13
<PAGE>
Non Arm's-Length Transactions. Certain transactions took place between
the Company and certain of its present shareholders, officers and
directors when the Company was established involving moneys paid and
shares of its common stock issued to them that were not arm's-length
transactions.
Forward Looking Statements
When used in this Form 10-SB filing, the words "believe", "should",
"would" and similar expressions which are not historical are intended
to identify forward-looking statements that involve risks and
uncertainties. Such statements include, without limitation,
expectations with respect to the results for the next fiscal year, the
Company's beliefs and its views about the long-term future of the
industry and the Company, its plan to address the Year 2000 issue,
the costs associated therewith and the results of Year 2000 non-
compliance by the Company or its suppliers or other strategic business
partners. In addition to factors that may be described in the Company's
other Securities and Exchange Commission ("SEC") filings, all of the
Risk Factors described herein could cause the Company's financial
performance to differ materially from that expressed in any forward-
looking statements made by, or on behalf of, the Company. The
Company does not undertake any responsibility to update the forward-
looking statements contained in this Form 10-SB filing.
ITEM 3. DESCRIPTION OF PROPERTY
Since December of 1998, the Company sublet from an affiliate
approximately 1,000 sq. ft. of office space for approximately $4,000 per
month at 2501 Davie Road, Suite 230, Davie, Florida 33317. Effective
December 10, 1999, the Company signed a five (5) year lease and is
occupying a new 4,500 square foot executive office complex located at
7284 W. Palmetto Park Road, Suite 106, Boca Raton, Florida 33433. The
monthly rent is $12,519. The telephone number at the new address is
(561) 750-1100.
In November, 1999 the Company also agreed to rent expandable warehouse
space (space as needed) located in Buffalo, New York on the premises of
its prime sub-contractor. This location will significantly reduce the
duplicity of handling and its related costs as well as reduce overhead.
It will also simplify inventory controls.
14
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Owner
- -------------- ------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Stock Paul B. Kravitz 1,036,968[1] 31.84%
4320 N.W. 101 Drive
Coral Springs, FL 33065
Common Stock Paul S. Mitchell 1,036,968[2] 31.84%
23086 Island View Dr.#7
Boca Raton, FL 33416
All Directors
and Executive Officers
as a group (2 persons) 2,073,936 63.68%
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Paul B. Kravitz 68 Chairman; Chief Executive Officer
and Director
Paul S. Mitchell 46 President, Secretary/Treasurer
and Director
Stephen M. Corriher 50 Chief Financial Officer
</TABLE>
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Officers are
elected annually by the Board of Directors ("Board") and, subject to
existing employment and consulting contracts and agreements, serve at the
discretion of the Board. The Company is planning on conducting an annual
shareholders' meeting in accordance with Nevada state law at its
principal office location in the second quarter of 1999, during which,
Messrs. Kravitz and Mitchell will stand for re-election as Directors.
Paul B. Kravitz, 68, Chairman and Chief Executive Officer of the Company,
has been in business for over 40 years. Twenty three of those years
related to the developing a furniture business that encompassed
manufacturing facilities, retail showrooms and an extensive marketing and
sales organization. The combined companies were taken public in 1979.
In 1986, Mr. Kravitz established a financial services company, The Landen
Group. In 1991 Mr. Kravitz was appointed by the Federal Deposit Insurance
________________________________
[1] GenEx Capital Corp. holds 1,896,000 Common shares, of which Mr. Kravitz
is a 50% owner. Mr Kravitz also holds 88,968 Common shares in his
name. All shares are restricted and subject to Rule 144.
[2] GenEx Capital Corp. holds 1,896,000 Common shares, of which Mr. Mitchell
is a 50% owner. Mr. Mitchell also holds 88,968 Common shares in his
name. All shares are restricted and subject to Rule 144.
15
<PAGE>
Corporation ("FDIC") to the board of a wholly owned subsidiary of
Southeast Bank, Inc. and later was appointed by that Board to be its
Chairman. During that time, Mr. Kravitz successfully sought and
arranged for the deposition of the assets of Southeast Bank Leasing,
Inc., bringing to the FDIC maximum value. Mr. Kravitz has been a
consultant to the CBI (Caribbean Basin Initiative) under President Reagan
and was responsible for many successful projects in Barbados and Grenada
funded by the World Bank. In 1990 he joined The AppleTree Companies, a
private company in the food industry. In August 1992, Mr. Kravitz
spearheaded a public offering for the company, raising $5,000,000 and
thereafter served as its president. Later, after it was revealed that its
two founders committed acts detrimental to the company and were
dismissed, Mr. Kravitz became the company's chairman and chief executive
officer. As a result of the actions of the founders, the SEC conducted
an investigation of the details associated with the public offering, and
even though Mr. Kravitz fully cooperated with the SEC=s investigation,
and without admitting or denying any wrongdoing, he accepted a consent
injunction bearing a civil monetary fine of $25,000. During his tenure as
chairman and chief executive officer of The AppleTree Companies, Mr.
Kravitz built a manufacturing and distribution network servicing
convenience stores in 24 states, with five manufacturing facilities and
annual sales of over $38,000,000. Mr. Kravitz retired from The AppleTree
Companies on August 10, 1996.
Mr. Kravitz is a graduate of Boston University and holds a Bachelor of
Science Degree. He was a pilot and Korean War veteran with an honorable
discharge as a 1st Lieutenant in the United States Air Force. He was
awarded the "National Service Medal". He is a member of Kappa Phi Alpha,
Public Relations and Journalistic Honor Society. He has been a published
writer for the aviation, food and furniture industries. He has been
widely quoted in major media as well as shelter magazines, and now
appears regularly in the Company's infomercials.
Paul S. Mitchell, 46, President and Secretary/Treasurer of the Company,
spent 12 years with Tasty Baking Company, of Pennsylvania. Mr. Mitchell
held several positions nationally, the last being the Director of Sales
and Marketing for Tasty Baking Company's West Coast operation. In 1987,
Mr. Mitchell acquired a "mom and pop" manufacturing company of fresh
sandwiches known as The Sandwich Makers, Inc. in Mesa, Arizona. The
company had annual sales of $135,000 and one part-time employee. In five
years, the company had annual sales of $4,800,000 with the expansion of
a second facility in San Diego, California.
In October,1995, Mr. Mitchell sold The Sandwich Makers to The AppleTree
Companies, Inc. Mr. Mitchell then served as Vice President of Sales for
Americas Foods, a subsidiary company of The AppleTree Companies. Mr.
Mitchell attended Drexel University, majoring in accounting.
Stephen M. Corriher, 50, is the Chief Financial Officer of the Company.
From February 1997 to October 1999, Mr. Corriher was the Controller for
Thermal Concepts, Inc., a major heating and air conditioning contractor
in the south Florida market. He guided the financial information and
reporting functions through a period of rapid growth in which the company
doubled in size reaching annual sales of $20 million.
From September 1995 through February 1997, Mr. Corriher acted as a
private liaison between a consortium of U.S. investors led by Kevin A.
Shannon and Alastor Enamels in the United Kingdom. The responsibilities
16
<PAGE>
included serving as a director, managing a complete audit of the books
and records of the production and distribution functions, identifying new
lines of business and forming strategic alliances with financial partners
who were looking for expansion into the US market.
From November 1993 through September 1995, Mr. Corriher was senior
analyst and controller for THSP, Inc., the general partner of a real
estate limited partnership. During his tenure, THSP successfully executed
a $30 million hostile tender offer for a publicly traded real estate
limited partnership. Mr. Corriher was the financial analyst and back
office administrator for THSP during the tender process. Once the limited
partnership was acquired, he become Controller of the General Partner and
merged the financial systems of the two entities and then took the
surviving company private.
Mr. Corriher holds a BA in Economics from Duke University and an MBA in
Accounting from Columbia University.
ITEM 6. EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended September 30, 1998
and September 30, 1999, the cash and other compensation paid to each of
the executive officers of the Company.
<TABLE>
<CAPTION>
Annual Compensation
- -------------------
Name and Other Awards Other
Position Held Year Salary Bonus Compensation Restricted Stock
Stock Awards
- ---------------- ---- ------ ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Paul B. Kravitz, 1999 -0- -0- -0- -0- -0-
Chairman & CEO
1998 -0- -0- -0- 88,968** -0-
Paul S. Mitchell 1999 -0- -0- -0- -0- -0-
President &
Treasurer 1998 -0- -0- -0- 88,969** -0-
</TABLE>
* Mr. Kravitz was awarded this stock in lieu of any compensation during the
year 1998.
** Mr. Mitchell was awarded this stock in lieu of any compensation during the
year 1998.
In each case above, "stock in lieu" was issued for the fiscal year ended
September 30, 1998, at a value of $.562 per share or $50,000.
ITEM 7. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Med Gen, Inc. was established under the laws of the State of Nevada in
October, 1996.
Paul Kravitz, Chairman and Chief Executive Officer of the Company and
Paul Mitchell, Chief Financial Officer and President of the Company,
are equal shareholders in GenEx Capital Corp.("GECC"), which was
established to act as a holding company for their stock in the Company.
Since the inception of the Company through September, 1999, pursuant to
an oral management agreement, GECC provided business management,
financial support and other administrative services to the Company in
exchange for Common Stock of the Company, at which time the agreement
was terminated. Beginning in October, 1999, Messrs. Kravitz and
Mitchell began providing such services to the
17
<PAGE>
Company and each began receiving salaries of $500 per week.
ITEM 8. DESCRIPTION OF SECURITIES
The Company, Inc. is authorized to issue 5,000,000 shares of common
stock, par value $.001 per Share, and 5,000,000 shares of non-designated
preferred stock. As of September 30, 1999, there were 3,256,716 shares of
common stock issued and outstanding, and no shares of any class of
preferred stock issued or outstanding. At the annual shareholders
meeting, shareholders approved an increase in the number of authorized
common stock to 20,000,000, and the Company will be filing amended
Articles of Incorporation with the state of Nevada to reflect this
change.
The holders of the Company's Common Stock: [i] have equal ratable
rights to dividends from funds legally available therefor, when as and
if declared by the Company's Board of Directors; [ii] are entitled to
share ratably in all of the Company's assets for distribution to
holders of the Company's Common Stock upon liquidation, dissolution or
winding up of the affairs of the Company; [iii] do not have preemptive
subscription or conversion rights and there are no redemption or
sinking fund provisions applicable thereto; and [iv] are entitled to
one vote per share on all matters on which stockholders may vote at all
meetings of stockholders. All shares of Common Stock now outstanding
are fully paid and non-assessable. The holders of shares of the
Company's Common Stock do not have cumulative voting rights, which
means that the holders of more than 51% of such outstanding shares,
voting for the election of Directors, can elect all of the Directors to
be elected, if they so choose and in such event, the holders of the
remaining shares will not be able to elect any of the Company's
Directors.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
As of December 31, 1999, there were approximately 110 Common Stock
shareholders consisting of both registered shareholders and those being
held by the Deposit Trust Corporation in street name. Of the 3,256,716
shares outstanding, 2,349,686 were restricted and 907,030 were non-
restricted. The Company's Common Stock is traded on the NASD OTC Bulletin
Board under the symbol "MGNI". The shares first began trading in October
of 1998.
The following table sets forth the high and low bid prices of the
Company's Common Stock from its inception of trading through December 31,
1999, as reported by the OTC Bulletin Board. The following high and low
bid prices reflect inter-dealer prices without retail markup, markdown or
commission, and may not represent actual transactions. An initial quote
was posted for MGNI on 9/30/98 of $1 bid - $6 ask, but no shares traded
until 10/14/98, with a quote of $2-1/4 bid - $5-1/2 ask.
18
<PAGE>
Common Stock
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
October 14-30, 1998 5.50 2.50
November 2-30, 1998 4.25 2.125
December 1-30, 1998 2.25 0.75
January 4-29, 1999 0.4375 0.3125
February 1-26, 1999 1.125 0.28125
March 1-30, 1999 0.9375 0.4375
April 1-29, 1999 0.4375 0.4375
May 3-38, 1999 0.4375 0.4375
June 1-29, 1999 0.625 0.3125
July 1-30, 1999 0.4375 0.3125
August 2-30, 1999 0.4375 0.28125
September 1-29, 1999 0.3125 0.3125
October 1 - 29, 1999 0.4375 0.3125
November 1 - 29, 1999 0.40625 0.3125
December 1 - 31, 1999 0.375 0.28125
</TABLE>
On January 12, 2000, the closing bid price of the Common Stock was
$0.28125.
The transfer agent for the Company's Common Stock is Liberty Transfer
Co., 191 New York Ave, Huntington, NY 11743-2711 Tel. (516) 385-1616.
ITEM 2. LEGAL PROCEEDINGS
To the Company's knowledge, there are no material legal proceedings
filed or threatened against the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On March 20, 1997, and October 24, 1997, the Company sold 1,600,000 and
40,000 shares of common stock respectively for $.001 per share to GenEx
Capital Corp. Paul Kravitz and Paul Mitchell each own fifty percent of
its outstanding shares. All of the shares of the Common Stock issued
were designated restricted shares upon issuance and subject to Rule 144
of the Securities Act of 1933, as amended (the "1933 Act".)
Between March, 1997 and February, 1998, the Company sold 400,000 shares
of Common Stock for $2.50 per share to 23 shareholders in reliance upon
Rule 504 of Regulation D promulgated under the 1933 Act.
Between September, 1998 and March, 1999, the Company sold167,250 shares
19
<PAGE>
of Common Stock for a total of $382,585 to 26 shareholders in reliance
upon Rule 506 of Regulation D promulgated under the 1933 Act. All of
the shares of the Common Stock issued were designated restricted shares
upon issuance and subject to Rule 144 of the 1933 Act.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
At present the Company has not entered into individual indemnification
agreements with its officers and/or directors. However, the Company's
by-laws provide a comprehensive indemnification provision which
provides that the Company shall indemnify, to the fullest extent under
Florida law, its directors and officers against certain liabilities
incurred with respect to their service in such capacities. In addition,
the by-laws provide that the personal liability of directors and
officers of the Company and its stockholders for monetary damages will
be limited.
Insofar as indemnification for liabilities arising under the 1933 Act
and Securities Exchange Act of 1934, as amended, may be permitted to
directors, officers and controlling persons of the Company pursuant to
the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act,
and is therefore unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
Company of expenses incurred by a Director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being offered or sold, the Company
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such case.
PART III
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
1. Financial Statements for years ended September 30,
1999 and September 30, 1998 for Med Gen Inc.(Audited)
(b) Exhibits
3(i)(a) Articles of Incorporation of Med Gen, Inc.
3(i)(b) Authorization to do business in State of
Florida for MedGen, Inc.
3(ii)(a) Bylaws of Med Gen Inc.
5 Tradeability Opinion
10(a) Production and Distribution Agreement with
Innovative Chemical Corp.
10(b) Sales, Marketing and Distribution Agreement
for " Sneeze No More"
20
<PAGE>
10(c) Sales, Marketing and Distribution Agreement
for " WaveGuard[TM]"
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
MED GEN, INC.
(Registrant)
Date: January 26, 2000
By:/s/Paul S. Mitchell
(Signature)
Paul S. Mitchell, President
(Print name and title of signing officer)
21
<PAGE>
21
<PAGE>
MED GEN, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
MED GEN, INC.
C O N T E N T S
PAGE
Independent Auditor's Report 1
Financial Statements:
Balance Sheet 2
Statements of Operations 3
Statement of Changes in Stockholders' Equity 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-14
<PAGE>
To The Board of Directors and Stockholders
Med Gen, Inc.
We have audited the accompanying balance sheet of Med Gen, Inc. as
of September 30, 1999, and the related statements of operations,
changes in stockholders' equity and cash flows for each of the two
years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Med
Gen, Inc., as of September 30, 1999, and the results of operations
and cash flows for each of the two years then ended, in conformity
with generally accepted accounting principles.
RICHARD H. HARRIS & ASSOCIATES, P.A.
December 7, 1999
<PAGE>
MED GEN, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
------
1999
----------
CURRENT ASSETS
Accounts receivable, net $ 105,759
Inventory 31,056
Due from related party 88,464
----------
Total current assets 225,279
FURNITURE AND EQUIPMENT, net 22,625
DEPOSITS 92,836
----------
TOTAL ASSETS $ 340,740
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Cash overdraft $ 1,592
Accounts payable 163,680
Accrued salaries 5,645
Customer deposits 38,428
Note payable 33,273
----------
Total current liabilities 242,618
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
5,000,000 shares authorized, -0-
shares issued and outstanding -
Common stock, $.001 par value
5,000,000 shares authorized,
3,256,716 issued and outstanding 3,257
Additional paid-in capital 1,459,241
Accumulated deficit (1,364,376)
----------
Total stockholders' equity 98,122
----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 340,740
==========
See accompanying notes to the financial statements.
(2)
<PAGE>
MED GEN, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
NET SALES $1,403,516 $ 247,847
COST OF GOODS SOLD 680,228 99,014
---------- ----------
GROSS PROFIT 723,288 148,833
---------- ----------
OPERATING EXPENSES
General and administrative 505,798 920,163
Selling 271,748 161,090
---------- ----------
Total operating expenses 777,546 1,081,253
---------- ----------
LOSS FROM OPERATIONS ( 54,258) (932,420)
OTHER (EXPENSE) INCOME ( 5,812) 1,940
---------- ----------
NET LOSS BEFORE INCOME TAX
(EXPENSE) BENEFIT (60,070) (930,480)
INCOME TAX (EXPENSE) BENEFIT (116,000) 116,000
---------- ----------
NET LOSS $ (176,070) $ (814,480)
========== ==========
LOSS PER SHARE - BASIC AND FULLY
DILUTED ( .06) $ ( .32)
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC AND FULLY
DILUTED 2,824,608 2,566,409
========== ==========
</TABLE>
See accompanying notes to the financial statements.
(3)
<PAGE>
MED GEN, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1997 2,322,400 $ 2,322 $ 618,232 $ (373,826) $ 246,728
Stock issued in exchange for
services 65,000 65 39,975 - 40,040
Common stock issued for cash 149,250 149 367,436 - 367,585
Private placement of common
stock, net of issuance costs
of $62,650 117,600 118 231,232 - 231,350
Net loss for the year - - - (814,480) (814,480)
--------- -------- ----------- ------------ ---------
BALANCE, SEPTEMBER 30, 1998 2,654,250 $ 2,654 $ 1,256,875 $(1,188,306) $ 71,223
Common stock issued for cash 18,000 18 14,982 - 15,000
Stock issued in exchange for
services 584,466 585 187,384 - 187,969
Net loss for the year - - - (176,070) (176,070)
--------- -------- ----------- ------------ ---------
BALANCE, SEPTEMBER 30, 1999 3,256,716 $ 3,257 $ 1,459,241 $(1,364,376) $ 98,122
========= ======== =========== =========== =========
</TABLE>
See accompanying notes to the financial statements.
(4)
<PAGE>
MED GEN, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (176,070) $ (814,480)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating activities:
Loss on disposal of property
and equipment 5,812 -
Depreciation and amortization 6,522 5,728
Stock issued for services 187,969 40,000
Deferred income taxes 116,000 (116,000)
Allowance for doubtful accounts 5,000 -
(Increase) decrease in:
Inventory 27,308 ( 21,231)
Prepaid expenses and other
assets - 4,923
Accounts receivable ( 97,319) ( 13,440)
Deposit on inventory - 13,400
Deposits ( 84,600) ( 1,070)
Increase (decrease) in:
Cash overdraft 1,592 -
Accounts payable 109,923 34,962
Due to affiliate - ( 5,335)
Accrued salaries ( 94,355) 100,000
Customer deposits 26,694 11,734
---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 34,476 (760,809)
---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of furniture and equipment ( 7,857) ( 11,389)
Decrease in loan receivable - 45,000
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ( 7,857) 33,611
---------- ----------
</TABLE>
See accompanying notes to the financial statements.
(5)
<PAGE>
MED GEN, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from issuance of
common stock 15,000 598,975
(Increase) decrease in due
from related parties ( 88,464) 17,500
Proceeds from note payable 49,910 -
Payments on note payable ( 16,637) -
---------- ----------
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES $( 40,191) $ 616,475
---------- ----------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS ( 13,572) (110,723)
CASH AND CASH EQUIVALENTS -
BEGINNING 13,572 124,295
---------- ----------
CASH AND CASH EQUIVALENTS - ENDING $ - $ 13,572
========== =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year:
Income taxes $ - $ -
Interest $ - $ -
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Issuance of common stock for
services $ 187,969 $ 40,040
</TABLE>
See accompanying notes to the financial statements.
(6)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Nature of Business
Med Gen, Inc. the (Company) was incorporated October 22,
1996 under the laws of the State of Nevada and began
operations in the State of Florida on November 12, 1996.
The Company currently markets an all natural product,
SNORENZ, which is designed to aid in the prevention of
snoring. The Company has a patent pending for its formula
and other trade secrets.
The Company also plans to offer additional, non-medicinal
products that are a blend of oils and vitamins that deal
with a variety of needs including vitamin and mineral
deficiencies.
Inventory
Inventory is stated at the lower of cost, determined on
the first-in, first-out (FIFO) method, or net realizable
market value.
Revenue Recognition
Revenue is recognized when products are shipped and are
presented net of returns.
Furniture and Equipment
Furniture and equipment is recorded at cost. Expenditures
for major improvements and additions are added to the
furniture and equipment accounts while replacements,
maintenance and repairs which do not extend the life of
the assets are charged to expense in the year incurred.
(7)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation and Amortization
Depreciation and amortization are computed by using the
straight-line method over the estimated useful lives of
the assets. The estimated useful lives are summarized as
follows:
Furniture and fixtures 7 years
Office and computer equipment 5 years
Computer software 3 years
Income Taxes
Deferred tax assets and liabilities are classified in
accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), which generally requires the
use of an asset liability approach for financial
accounting and reporting for income taxes. If it is more
likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is
recognized.
Allowance for Doubtful Accounts
The Company has established a reserve for certain accounts
receivable for which it deems collection to be uncertain.
The allowance for doubtful accounts was $5,000 and $0, at
September 30, 1999 and 1998, respectively.
Statements of Cash Flows
The Company considers all investments with an original
maturity of three months or less to be cash equivalents.
(8)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
Management uses estimates and assumptions in preparing
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Accordingly, actual
results could vary from the estimates used in preparing
the financial statements.
Fair Value
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments"
requires disclosure of information about the fair value
of certain financial instruments for which it is
practicable to estimate that value. For purposes of this
disclosure, the fair value of a financial instrument is
the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than
in a forced sale or liquidation.
The carrying amounts of the Company's financial
instruments, including receivables, accounts payable and
accrued liabilities, approximates fair value due to the
relatively short period to maturity for these instruments.
The carrying value of the Company's notes payable
approximates fair value based on the current rates offered
to the Company for debt of the same remaining maturities.
Loss Per Share
Loss per share has been computed by dividing the net loss
by the weighted average number of common shares
outstanding.
(9)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 2. FURNITURE AND EQUIPMENT
Furniture and equipment at September 30, 1999 consisted
of the following:
1999
---------
Furniture and office
equipment $ 19,855
Computer equipment and
software 16,127
---------
35,982
Accumulated depreciation
and amortization (13,357)
---------
Total $ 22,625
=========
Depreciation and amortization expense for the years ended
September 30, 1999 and 1998 was $6,522 and $5,728,
respectively.
NOTE 3. INCOME TAXES
The provision for income taxes consisted of the following:
1999 1998
--------- ---------
Gross deferred tax asset $(551,000) $(460,000)
Valuation allowance 551,000 344,000
Write down of prior year
deferred tax asset 116,000 -
--------- ---------
Provision for income tax
expense (benefit) $ 116,000 $(116,000)
========= =========
(10)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 3. INCOME TAXES (CONTINUED)
The deferred tax asset consisted mainly of the tax
benefits of federal and state net operating loss
carryforwards of approximately $1,360,000 at September 30,
1999. These net operating loss carryforwards, if not
used, will expire in the year 2014. Due to the
uncertainty that the Company will generate sufficient
income in the future to utilize the entire deferred tax
asset, a valuation allowance has been recorded.
NOTE 4. NOTE PAYABLE
Note payable at September 30, 1999 represents a short term
borrowing from Actrade Capital, Inc. The note is payable
in six monthly installments of $8,318, with the final
payment due January 20, 2000. Due to the short term
nature of this note, no interest is being charged.
NOTE 5. STOCKHOLDERS' EQUITY
Under the terms of a Private Placement Memorandum dated
November 15, 1996, the Company offered 400,000 shares of
$.001 par value common stock at a price of $2.50 per
share. Through September 30, 1999, the Company had issued
400,000 shares. Proceeds from the Private Placement were
$800,304, net of stock offering costs of $199,696.
Subsequent to September 30, 1999, the Company's Board of
Directors approved increasing the number of authorized
common shares to 20 million. Also approved was a plan to
offer a maximum offering of $100,000 of restricted stock
to a limited number of Med Gen shareholders. The Company
has issued, subsequent to September 30, 1999, 100,000
shares of stock under this plan for $31,250.
(11)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 5. STOCKHOLDERS' EQUITY (CONTINUED)
The Company issued restricted common stock in payment of
services and compensation for the year ended September 30,
1999. These shares were valued at a discount due to the
restrictions placed on them. The number of shares issued
and the valuation are as follows:
Restricted
Shares of
To Whom Issued Stock Value
-------------- ---------- ---------
Gen Ex Capital Corp. 256,000 $ 40,000
Officers 187,936 102,813
Employees 68,000 20,313
Legal 19,030 12,889
Consulting 53,500 11,954
584,466 $ 187,969
========= =========
NOTE 6. RELATED PARTY TRANSACTIONS
As of September 30, 1999 and 1998, Gen Ex Capital Corp.
(Gen Ex) was the majority stockholder. Furthermore, the
officers of the Company are officers and shareholders of
Gen Ex. For the year ended September 30, 1999, the
Company paid Gen Ex a management fee of $120,000,
partially through the issuance of 256,000 shares of
restricted stock valued at $40,000. For the year ended
September 30, 1998, the Company paid Gen Ex management
fees of $244,745.
At September 30, 1999, the amount due from related party
of $88,464 represents short-term, non interest bearing
advances to a related company by virtue of common control.
The Company considers these amounts to be fully
collectible.
The law firm engaged by the Company to handle certain
corporate legal matters employs an attorney related to an
officer of the Company. Fees paid to this firm totaled
$7,489 and $-0- for the years ended September 30, 1999 and
1998.
(12)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 7. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leased its office facility under a long-term
operating lease, expiring July, 2002. In December, 1998,
the Company sublet these premises. In March, 1999, the
sublessor defaulted on the rent causing the Company to
default on the lease. A settlement was negotiated,
whereby the Company is paying rent due of $50,131 in
monthly payments of $5,494. As of September 30, 1999,
$34,636 remains unpaid and is included in accounts
payable.
At present, the Company is sharing office space with a
related company by virtue of common control. Rent charged
by this entity is $2,955 per month, which approximates
fair market value, under a month to month lease. At
September 30, 1999, total rent paid to this entity was
$29,551.
On July 27, 1999 the Company entered into a five year
operating lease for its office facility. Under the terms
of the agreement, monthly rent, including common area
maintenance, will be $12,170 with no annual cost of living
adjustment in the base rent. Rental payments will commence
upon occupancy. To date, the Company has not occupied the
premises since building improvements are not completed.
The Company also leases various motor vehicles and office
equipment under non-cancelable leases expiring through the
year 2004. Monthly payments under these leases total
$1,593.
The Company has entered into various leases for computer
and office equipment on behalf of a related entity by
virtue of common control. This related company is using
the assets as well as making the lease payments. The
remaining lease payments under these leases amounted to
approximately $206,402 as of September 30, 1999.
(13)
<PAGE>
MED GEN, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under all noncancellable
operating leases, including those for which the Company
is the guarantor, for years ending subsequent to September
30, 1999 are as follows:
2000 $ 242,658
2001 263,109
2002 201,812
2003 158,760
2004 146,747
----------
$1,013,086
==========
Rent expense for the years ended September 30, 1999 and
1998 was $130,886 and $95,113, respectively.
NOTE 8. CONCENTRATIONS
Through September 30, 1999, the Company derived
substantially all of its revenue from the sale of one
product, SNORENZ. Credit is granted to their customers
in the normal course of business.
The Company derived 86% of total sales for the year ended
September 30, 1999, from three companies who distribute
the product both domestically and abroad.
The Company has an exclusive contract with a manufacturing
company to produce SNORENZ.
NOTE 9. LINE OF CREDIT
On August 27, 1999, the company established a $50,000 line
of credit with Union Planters Bank. Under the terms of
the loan agreement, principal payments will be due on
demand, with interest payable monthly. Interest is
charged at a rate of three percentage points over a
specified index currently at 8.25%, resulting in a rate
of 11.25% per annum at September 30, 1999. This line is
collateralized by substantially all of the assets of the
Company and is personally guaranteed by an officer of the
company. As of September 30, 1999, there were no
outstanding borrowings against the line. Subsequent to
September 30, 1999, the Company borrowed $20,000 against
this line.
(14)
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 22, 1996
NO. C21932-96
/s/Dean Heller
DEAN HELLER SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
Med Gen Inc.
The undersigned proposes to form a corporation under the laws of the State
of Nevada, relating to private corporations, and to that end hereby
adopts articles of incorporation as follows:
ARTICLE ONE
NAME
The name of the corporation is Med Gen Inc.
ARTICLE TWO
LOCATION
The registered office of this corporation is at 318 North Carson Street
Suite 214, City of Carson City, State of Nevada, 89701. The resident agent
is State Agent and Transfer Syndicate, Inc.
ARTICLE THREE
PURPOSES
This corporation is authorized to carry on any lawful business or
enterprise.
ARTICLE FOUR
CAPITAL STOCK
The amount of the total authorized capital stock of this corporation is
$10,000 as 5,000,000 common shares and 5,000,000 preferred shares each
with a par value of one mill ($.001). Such shares are non-assessable.
ARTICLE FIVE
DIRECTORS
The initial governing board of this corporation shall be styled
directors and shall have one member. The name and address of the
member of the first board of directors is:
Paul B. Kravitz
7040 W. Palmetto Park Road
Suite 2-467
Boca Raton FL 33433
<PAGE>
ARTICLE SIX
ELIMNATING PERSONAL LIABILITY
Officers and directors shall have no personal liability to the corporation
or its stockholders for damages for breach of fiduciary duty as an officer
or director. This provision does not eliminate or limit the liability of
an officer or director for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or the payment of
dividends and/or distributions in violation of NRS 78.300.
ARTICLE SEVEN
INCORPORATORS
The name and address of the incorporator is: Elizabeth R. Brogan, 318
North Carson Street, Suite 214, Carson City, Nevada 89701
ARTICLE EIGHT
PERIOD OF EXISTENCE
The period of existence of this corporation shall be perpetual.
ARTICLE NINE
AMENDMENT OF ARTICLES OF INCORPORATION
The articles of incorporation of the corporation may be amended from time
to time by a majority vote of shareholders voting by written ballot in
person or by proxy held at any general or special meeting of
shareholders upon lawful notice.
ARTICLE TEN
VOTNG OF SHARES
In any election participated in by the shareholders, each shareholder
shall have one vote for each share of stock he owns, either in person
or by proxy as provided by law. Cumulative voting shall not prevail in
any election by the shareholders of this corporation.
IN WITNESS WHEREOF the undersigned, ELIZABETH R. BROGAN, for the purpose
of forming a corporation under the laws of the State of Nevada, does
make, file and record these articles, and certifies that the facts herein
<PAGE>
stated are true, and I have accordingly hereunto set my hand this day,
October 21, 1996.
INCORPORATOR:
/s/Elizabeth R. Brogan
Elizabeth R. Brogan
STATE OF NEVADA
COUNTY OF CARSON CITY
On October 21, 1996, Elizabeth R. Brogan personally appeared before me,
a notary public, and executed the above instrument.
/s/
SIGNATURE OF NOTARY
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
State Agent and Transfer Syndicate, Incorporated hereby certifies that
on October 21, 996, we accepted appointment as Registered Agent for
the above corporation in accordance with Sec. 78.090, NRS 1957.
IN WITNESS WHEREOF, I have hereunto set my hand this October 21, 1996.
/s/Elizabeth R. Brogan
Elizabeth R. Brogan for
State Agent and Transfer
Syndicate Incorporated
STATE OF FLORIDA
SEAL
IN GOD WE TRUST
DEPARTMENT OF STATE
I certify the records of this office that MED GEN INC. is a Nevada
corporation authorized to transact business in the State of Florida,
qualified on November 14, 1996.
The document number of this corporation is F96000005967.
I further certify that said corporation has paid all fees and
penalties due this office through December 31, 1999, that its most
recent annual report was filed on May 27, 1999, and its status is
active.
I further certify that said corporation has not filed a Certificate
of Withdrawal.
Given under my hand and the
Great Seal of the State of
Florida at Tallahassee, the
Capitol, this the Fourteenth
GREAT SEAL OF THE day of June, 1999
STATE OF FLORIDA
IN GOD WE TRUST /s/ Katherine Harris
Katherine Harris
CR2E022 (1-99) Secretary of State
BYLAWS
of
MED GEN, INC.
(A Nevada Corporation)
ARTICLE I
General
1.01 Applicability. These Bylaws provide rules for
conducting the business of this corporation (the "Company"). Every
shareholder and person who subsequently becomes a shareholder, the
Board of Directors, Committees and Officers of the Company shall
comply with these Bylaws, as amended from time to time. All Bylaws
and resolutions heretofore adopted by the Board of Directors are
hereby repealed, to the extent in conflict with the provisions of
these Bylaws.
1.02 Officers. The principal office of the Company shall be
selected by the Board of Directors from to time and may be within
or without the State of Nevada. The Company may have such other
offices, within or without the State of Nevada, as the Board of
Directors may, from to time, determine. The registered office of
the Company required by the General Corporation Law of Nevada to be
maintained in Nevada may be, but need not be, identical with the
principal offices in Nevada, and the address of the registered
office may be changed from time to time by the Board of Directors.
1.03 Definition of Terms. Terms defined in the Company's
Articles of Incorporation, as amended and restated from time to
time (the "Charter"), shall have the same meanings when used in
these Bylaws.
ARTICLE II
Stock Certificates
2.01 Stock Certificates. The shares of the Company's capital
stock shall be represented by consecutively numbered certificates
signed by the President or a Vice President and the Secretary or
Assistant Secretary of the Company, and sealed with the seal of the
Company, or a facsimile thereof. If certificates are signed by a
transfer agent and registrar other than the Company or an employee
thereof, the signatures of the officers of the Company may be
facsimile. In case any officer who has signed (by real or facsimile
signature) a certificate shall have ceased to hold such office
before the certificate is issued, it may be issued by the Company
with the same effect as if he continued to hold such office on the
date of issue. Each certificate representing shares shall state
upon the face thereof.- (i) that the Company is organized under the
laws of the State of Nevada; (ii) the name of the person to whom
issued; (iii) the number, class and series (if any) of shares which
such certificate represents; and (iv) the par value, if any, of the
shares represented by such certificate, or a statement that the
shares have no par value.
If any class or series of shares is subject to special
powers, designations, preferences or relative, participating or
other special rights, then such (together with all
qualifications, limitations or restrictions of such preferences
or rights) shall be set forth in full or summarized on the
certificate representing such class or series. Moreover, each
certificate shall state that the Company will furnish, without
charge, to the registered holder of the shares represented by
such certificate who so requests a statement setting forth such
information in full.
Each certificate also shall set forth restrictions upon
transfer, if any, or a reference thereto, as shall be adopted by
the Board of Directors or by the shareholders, or as may be
contained in this Article 11. Any shares issued without
registration under the Securities Act of 1933, as amended, shall
bear a legend restricting transfer unless such shares are
registered under such act or an exemption from registration is
available for a proposed transfer.
1
<PAGE>
2.02 Consideration for Shares. Shares of the Company shall
be issued, and treasury shares may be disposed of, for such
consideration or considerations as shall be fixed from time to time
by the Board of Directors. No shares shall be issued for less than
the par value thereof. The consideration for the issuance of shares
may be paid, in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed
for the Company, or as permitted in the Charter.
2.03 Lost Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Company
alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of
stock to be lost, and the Board of Directors when authorizing such
issue of a new certificate or certificates may in its discretion,
and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates or his
legal representative to advertise the same in such manner as it
shall require, and/or famish to the Company a bond in such sum as
it may direct, as indemnity against any claim that may be made
against the Company. Except as hereinabove in this section
provided, no new certificate or certificates evidencing shares of
stock shall be issued unless and until the old certificate or
certificates, in lieu of which the new certificate or certificates
are issued, shall be surrendered for cancellation.
2.04 Registered Holder as Owner. The Company shall be
entitled to treat the registered holder of any shares of the Company
as the owner of such shares, and shall not be bound to recognize any
equitable or other claim to, or interest in, such shares or rights
deriving from such shares, unless and until such purchaser,
assignee, transferee or other person becomes the registered holder
of such shares, whether or not the Company shall have either actual
or constructive notice of the interests of such purchaser,
assignee, or transferee or other person. The purchaser, assignee,
or transferee of any of the shares of the Company shall not be
entitled: to receive notice of the meetings of the shareholders;
to vote at such meetings; to examine a list of the shareholders;
to be paid dividends or other sums payable to shareholders; or to
own, enjoy and exercise any other property or rights deriving from
such shares against the Company, until such purchaser, assignee,
or transferee has become the registered holder of such shares.
2.05 Reversions. Cash, property or share dividends, shares
issuable to shareholders in connection with a reclassification of
stock, and the redemption price of redeemed shares, which are not
claimed by the shareholders entitled thereto within TWO years after
the dividend or redemption price became payable or the shares
became issuable, despite reasonable efforts by the Company to pay
the dividend or redemption price or deliver the certificate(s) for
the shares to such shareholders within such time shall, at the
expiration of such time, revert in full ownership to the Company,
and the Company's obligation to pay any such dividend or redemption
price or issue such shares, as the case may be, shall thereupon
cease; provided, that the Board of Directors may at any time and
for any reason satisfactory to it but need not, authorize (i)
payment of the amount of cash or property dividend or (ii) issuance
of any shares, ownership of which has reverted to the Company
pursuant to this Section of Article 11, to the person or entity who
or which would be entitled thereto had such reversion not occurred.
2.06 Returned Certificates All certificates for shares
changed or returned to the Company for transfer shall be marked by
the Secretary "CANCELLED," with the date of cancellation, and the
transaction shall be immediately recorded in the certificate book
opposite the memorandum of their issue. The returned certificate
may be inserted in the certificate book.
2.07 Transfer of Shares. Upon surrender to the Company or
to a transfer agent of the Company of a certificate of stock
endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, and such documentary stamps
as may be required by law, it shall be the duty of the Company
to issue a new certificate, upon payment by the transferee of
such nominal charge therefor as the Company or its transfer
agent may impose. Each such transfer of stock shall be entered
on the stock book of the Company. Respecting any securities
issued in reliance upon Rule 903 of Regulation S of the
Securities and Exchange Commission at any time when the Company
is not a "reporting issuer" as defined in Regulation S, no
transfer of such securities shall be registered unless made in
2
<PAGE>
accordance with the provisions of Regulation S. At any time when
the Company has appointed a transfer agent for its shares, the
remainder of this paragraph shall apply. A transfer of shares
evidenced by a certificate bearing a standard form of legend
which restricts transfer of the shares (except in the event of
registration or the availability of an exemption under the
Securities Act of 1933) shall not require the Company's consent
if the shares to be sold are proposed to be sold in compliance
with either Rule 144, Rule 701 or Rule 904 of Regulation S of
the Securities and Exchange Commission and the transfer is
accompanied by an opinion of counsel (which need not be the
Company's counsel) which states that the proposed transfer will
comply with the applicable rule or regulation being relied upon
for transfer. In view of potential liability to the Company and
its officers and directors for interfering without firm and
clear legal grounds in the making of, or delaying, any sale of
the Company's shares pursuant to Rules 144, 701 or 904, it is
declared to be the Company's policy not to interfere with or
hinder any transfer proposed to be made pursuant to any of such
rules, if accompanied by an opinion of counsel satisfactory to
the Company and its counsel in light of surrounding facts.
2.08 Transfer Agent The Board of Directors shall have power
to appoint one or more transfer agents and registers for the
transfer and registration of certificates of stock of any class,
and may require that stock certificates shall be countersigned and
registered by one or more of such transfer agents and registrars.
Any powers or duties with respect to the transfer and registration
of certificates may be delegated to the transfer agent and
registrar.
ARTICLE III
Meetings of the Shareholders
3.01 Annual Meeting. The annual meeting of the shareholders
shall be held between the 90th and 180th day after the tax year
end, at such date and time and at such place, within or without the
State of Nevada, as is designated from time to time by the Board of
Directors and stated in the notice of the meeting. At each annual
meeting the shareholders shall elect a Board of Directors in
accordance with the Charter and shall transact such other business
as may properly be brought before the meeting.
3.02 Special Meetings. Unless otherwise proscribed by law,
the Charter or these Bylaws, special meetings of the shareholders
may be called by the Chairman of the Board, the President, or a
majority of the Board of Directors. The President shall call a
special meeting upon the Secretary's receipt of written demand
therefor by the holders of not less than ten percent (10%) of the
total voting power. Requests for special meetings shall state the
purpose or purposes of the proposed meeting.
3.03 Notice of Meetings. Except as otherwise provided by
law, the Charter or these Bylaws, written notice of any annual or
special meeting of the shareholders shall state the place, date,
and time thereof and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given to each
shareholder of record entitled to vote at such meeting not fewer
than IO nor more than 60 days prior to the meeting by any means
permitted in Section 8.01 hereof. No business other than that
specified in the notice of a special meeting shall be transacted at
any such special meeting.
3.04 Record Date. In order that the Company may determine
shareholders of record who are entitled (i) to notice of or to vote
at any shareholders meeting or adjournment thereof, (ii) to express
written consent to corporate action in lieu of a meeting, (iii) to
receive payment of any dividend or other distribution, or (iv) to
allotment of any rights or to exercise any rights in respect of any
change, conversion or exchange of stock, or in order that the
Company may make a determination of shareholders of record for any
other lawful purpose, the Board of Directors may fix in advance a
date as the record date for any such determination. Such date shall
not be more than 60 days, and in case of a meeting of shareholders,
not less than 10 days prior to the date on which the particular
action, requiring such determination of shareholders, is to be
taken, and in no event may the record date precede the date upon
which the Directors adopt a resolution fixing the record date.
3
<PAGE>
If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is given (as
defined in Section 8.01 hereof) or the date on which the resolution
of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
the shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in
this Section such determination shall apply to any adjournment
thereof, unless the Board of Directors fixes a new record date for
the adjournment. The record date for determining shareholders
entitled to consent to corporate actions without a meeting shall be
fixed as provided in Section 3.12 hereof.
3.05 Voting List At least 10 days but nor more than 60 days
before any meeting of shareholders, the officer or transfer agent
in charge of the Company's stock transfer books shall prepare a
complete alphabetical list of the shareholders entitled to vote at
such meeting, which list shows the address of each shareholder and
the number of shares registered in his or her name. The list so
prepared shall be maintained at the corporate offices of the
Company and shall be open to inspection by any shareholder, for any
purpose germane to the meeting, at any time during usual business
hours during a period of no fewer than 10 days prior to the
meeting. The list shall also be produced and kept open at any
shareholders meeting and, except as otherwise provided by law, may
be inspected by any shareholder or proxy of a shareholder who is
present in person at the meeting. The original stock transfer books
shall be prima facie evidence as to who are the shareholders
entitled to examine the list of shareholders and to vote at any
meeting of shareholders.
3.06 Quorum; Adjournments. (a) The holders of a majority of
the total voting power at any shareholders meeting present in
person or by proxy shall be necessary to and shall constitute a
quorum for the transaction of business at all shareholders
meetings, except as otherwise provided by law or by the Articles.
(b) If a quorum is not present in person or by proxy at
any shareholders meeting, a majority of the voting shares present
or represented shall have the power to adjourn the meeting from
time to time to the same or another place within 30 days thereof
and no further notice of such adjourned meeting need be given if
the time and place thereof are announced at the meeting at which
the adjournment is taken.
(c) Even if a quorum is present in person or by proxy at
any shareholders meeting, a majority of the voting shares present
or represented shall have the power to adjourn the meeting from
time to time, for good cause, without notice of the adjourned
meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken, until a new date which is not
more than 30 days after the date of the original meeting.
(d) Any business which might have been transacted at a
shareholders meeting as originally called may be transacted at any
meeting held after adjournment as provided in this Section 3.06 at
which reconvened meeting a quorum is present in person or by proxy.
Anything in paragraph (b) of this Section to the contrary
notwithstanding, if an adjournment is for more than 30 days, or if
after an adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote thereat.
(e) The shareholders present at a duly called meeting may
continue to transact business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
3.07 Proxies. At all meetings of shareholders, a
shareholder may vote by proxy, executed in writing by the
shareholder or by his duly authorized attorney in fact. Any
proxyholder shall be authorized to sign, on the shareholders
behalf, any written consent for shareholder action taken in lieu
of a meeting. Such proxy shall be filed with the Secretary of
the Company before or at the time of the meeting. No proxy shall
be valid after the expiration of six (6) months from the date of
its execution, unless coupled with an interest, or unless the
person executing it specifies therein the length of time for
which it is to continue in force, which in no case shall exceed
three (3) years from the date of its execution.
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3.08 Voting of Shares. At any shareholders meeting every
shareholder having the right to vote shall be entitled to vote in
person or by proxy. Except as otherwise provided by law, by the
Articles or in the Board resolution authorizing the issuance of
shares, each shareholder of record shall be entitled to one vote
(on each matter submitted to a vote) for each share of capital
stock registered in his, her or its name on the Company's books.
Except as otherwise provided by law or by the Articles, all matters
submitted to the shareholders for approval shall be determined by
a majority of the votes cast (not counting abstentions) at a legal
meeting commenced with a quorum.
3.09 Voting of Shares by Certain Holders. Neither treasury
shares, nor shares of its own stock held by the Company in a
fiduciary capacity, nor shares held by another corporation if the
majority of the shares entitled to vote for the election of
directors of such other corporation is held by the Company, shall
be voted at any meeting or counted in determining the total number
of outstanding shares at any given time.
Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of
such provision, as the board of directors of such corporation may
determine.
Shares held by an administrator, executor, personal
representative, guardian, or conservator may be voted by him,
either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be
voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such
shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may
be voted by such receiver without the transfer thereof into his
name if authority to do so be contained in an appropriate order of
the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
3.10 Chairman. The Chairman of the Board of Directors of
the Company, if there is one, or in his absence, the President
shall act as chairman at all meetings of shareholders.
3.11 Manner of Shareholder Voting. Voting at any shareholders'
meeting shall be oral or by show of hands; provided, however, that
voting shall be by written ballot if such demand is made by any
shareholder present in person or by proxy and entitled to vote.
3.12 Informal Action by Shareholders; Record Date. Any
action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action
so taken, shall be signed by a majority of the total voting power;
provided, that where an action requires a greater proportion of the
total voting power, then the consent shall be signed by such greater
proportion. No written consent will be effective unless written
consents, signed by a sufficient proportion of shareholders to take
action, are delivered to the Company within sixty (60) days of the
date of the earliest such consent. Such consent shall have the same
force and effect as a vote of the shareholders, and may be stated
as such in any document filed with the Secretary of State of Nevada
under the General Corporation Law of Nevada. Prompt notice of such
action by written consent of less than all shareholders entitled to
vote shall be given to all shareholders who have not consented in
writing to the action taken.
The record date for determining shareholders entitled to
consent to corporate actions in writing without a meeting (the
"consent record date') shall not precede, and shall not be more
than ten (10) days after, the date upon which the resolution fixing
the record date was adopted. However, if no consent record date is
fixed, the consent record date shall be, respectively, (i) if prior
action by the Board of Directors is required under the General
Corporation Law of Nevada for the consent to be validly taken, the
close of business on the day on which the Board of Directors adopts
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the resolution taking such prior action; and (ii) if prior action
by the Board of Directors is not required, the first date on which
a properly signed and dated consent setting forth the action taken
or proposed to be taken is delivered as required above.
3.13 Presiding Officers; Order of Business. (a) Shareholders
meetings shall be presided over by the Chairman of the Board; or if
the Chairman (and Vice Chairman) is not present, by the President;
or if the President is not present, by a Vice President; or if a
Vice President is not present, by such person chosen by the Board
of Directors; or if none, by a chairperson to be chosen at the
meeting by shareholders present in person or by proxy who own a
majority of the voting power present. The Secretary of a
shareholders meeting shall be the Secretary of the Company; or if
the Secretary is not present, an Assistant Secretary; or if an
Assistant Secretary is not present, such person as may be chosen by
the Board of Directors; or if none, by such person who is chosen by
the chairperson at the meeting.
(b) The following order of business, unless otherwise ordered
at the shareholders meeting by the chairperson thereof, shall be
observed as far as practicable and consistent with the purposes of
the meeting:
1. Calling of the shareholders' meeting to order.
2. Presentation of proof of mailing of the notice of the
meeting and, if a special meeting, the call thereof.
3. Presentation of proxies.
4. Determination and announcement that a quorum is present.
5. Reading and approval (or waiver thereof) of the minutes
of the previous meeting of shareholders.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting
or a meeting called for such purpose.
8. Consideration of the specific purpose or purposes for
which the meeting has been called, other than election of
directors.
9. Transaction of such other business as may properly come
before the meeting.
10. Adjournment.
3.14 Annual Report The President of the Company shall prepare
an annual report which will set forth a statement of affairs of the
Company as of the end of its last fiscal year, including a balance
sheet, an income statement and a statement of changes in financial
position, which need not be audited, and present them at the annual
meeting of shareholders. Failure to prepare or present an annual
report shall not affect the validity of any shareholder meeting. No
such report need be prepared or presented for any fiscal year in
which the Company was inactive. This Section shall not apply as to
any fiscal year if the Company (i) was at the year end subject to
the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, and subsequently furnishes to the
shareholders an annual report or report on Form 10-K under such Act
covering such fiscal year, or (ii) furnishes to shareholders an
Information Statement which conforms to the requirements of Rule
15c2-11 of the Securities and Exchange Commission.
ARTICLE IV
Directors, Powers and Meetings
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4.01 General Powers. All corporate powers shall be
exercised, and the Company's business and affairs shall be
managed, by or under the authority of its Board of Directors,
except as otherwise provided in the General Corporation Law of
Nevada or the Charter.
4.02 Number, Tenure and Qualifications. The Company's Board of
Directors shall consist of not less than three (3) and not more
than seven (7) Directors, as resolved from time to time by the
Board of Directors. If such number is not so fixed, the Company
shall have THREE Directors, except that if the Company at any time
has less than three shareholders of record, there need only be as
many Directors as there are shareholders. Directors shall be
elected at each annual meeting of shareholders, except as otherwise
provided below. Each Director shall hold office until the next
annual meeting of shareholders and thereafter until his successor
shall have been elected and duly qualified. Directors need not be
residents of Nevada or shareholders of the Company. Directors shall
be elected by plurality vote. At least one-fourth in number of the
Directors must be elected annually. No decrease in the number of
Directors shall shorten the ten-n of any incumbent Director.
4.03 Vacancies; Resignation. (a) Any vacancy occurring in the
Board of Directors, except resulting from an increase in the number
of directors, may be filled by the affirmative vote of a majority
of the remaining Directors, though less than a quorum, or by a sole
remaining Director. A Director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in the number of
Directors shall be filled by the affirmative vote of a majority of
the entire board or by a majority of the total voting power at any
annual meeting or at a special meeting of shareholders called for
that purpose, or by means of written shareholder consents taken in
lieu of a meeting. Every director chosen to fill a vacancy as
provided in this Section shall hold office until the next annual
meeting of shareholders or until his successor has been elected and
qualified.
(b) Any Director may resign at any time by giving written
notice to the Board, the Chairman of the Board, the President or
the Secretary of the Company. Unless otherwise specified in such
written notice, a resignation shall take effect upon delivery to
the Board or the designated officer. A resignation need not be
accepted in order for it to be effective.
4.04 Removal of Directors. Any Director may be removed only by
the shareholders in the manner provided in the Company's Charter
and, if no such provision appears therein, then as provided by law.
Such action may be taken at any special meeting called for that
purpose or by means of written shareholder consents. In case any
vacancy so created shall not be filled by the shareholders at such
meeting or in the written consent effecting removal, such vacancy
may be filled by a majority of the Board of Directors.
4.05 Place of Meetings. The Board of Directors may hold both
regular and special meetings either within or without the State of
Nevada, at such place as the Board of Directors from time to time
deems advisable.
4.06 Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than these Bylaws
immediately after and at the same place as the annual meeting of
shareholders. The Board of Directors may provide by resolution the
time and place for the holding of additional regular meetings
without other notice than such resolution; provided, that any
Director not present when any such resolution is passed is given
notice of the resolution.
4.07 Special Meetings. A special meeting of the Board of
Directors shall be held without other notice than these Bylaws
immediately after and at the same place as every special meeting
of shareholders. Special meetings of the Board of Directors also
may be called by or at the request of the Chairman of the Board,
the President, or any two Directors upon two days' notice to
each director if such notice is delivered personally or sent by
telegram, or upon five days' notice if sent by mail.
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4.08 Telephonic Meetings. One or more members of the Board
of Directors or any committee designated by the Board may
participate in a meeting of the Board of Directors or committee
by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can
hear one another at the same time. Such participation shall
constitute presence in person at the meeting. All participants
in any meeting of Directors, by virtue of their participation
and without further action on their part, shall be deemed to
have consented to the recording of such meeting by electronic
device or otherwise, and to the making of a written transcript
thereof, in order that minutes thereof shall be available for
the Company's records.
4.09 Notice. Except as otherwise provided above, notice of
the time, date and place, of every special meeting of Directors or
any committee thereof shall be given. Any Director may waive notice
of any meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to
the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice or waiver of notice of
such meeting.
4.10 Quorum; Adjournments. A majority of the number of
directors then in office, present in person or by means of
conference telephone or similar equipment shall constitute a quorum
for the transaction of business at every Board meeting, and the act
of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors,
except as may otherwise specifically be provided by law, the
Charter or these Bylaws. If a quorum is not present at any Board
meeting, the directors present may adjourn the meeting, from time
to time, without notice other than announcement of the meeting,
until a quorum is present.
4.11 Compensation. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board
of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending
committee meetings. The amount or rate of such compensation of
members of the Board of Directors or of Committees shall be
established by the Board of Directors and shall be set forth in the
minutes of the Board.
4.12 Presumption of Assent A Director of the Company who is
present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such
action with the person acting as the Secretary of the meeting
before the adjournment thereof, or shall forward such dissent by
registered or certified mail, first class, postage prepaid, to the
Secretary of the Company, provided such mailing is postmarked
within ten calendar days after the adjournment of the meeting. Such
right to dissent shall not apply to a Director who voted in favor
of such action.
4.13 Action by Directors Without Meeting. Any action required
to be taken at a meeting of the Directors of the Company or of a
committee of Directors or any action which may be taken at such a
meeting, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the
Directors entitled to vote with respect to the subject matter
thereof. A consent shall be sufficient for this Section if it is
executed in counterparts, in which event all of such counterparts,
when taken together, shall constitute one and the same consent.
4.14 Bank Accounts, etc. Anything herein to the contrary
notwithstanding, the Board of Directors may, except as may
otherwise be required by law, authorize any officer or officers,
agent or agents, in the name of and on behalf of the Company, to
sign checks, drafts, or other orders for the payment of money or
notes or other evidences of indebtedness, to endorse for deposit,
deposit to the credit of the Company at any bank or trust company
or banking institution in which the Company may maintain an account
or to cash checks, notes, drafts, or other bankable securities or
instruments, and such authority may be general or confined to
specific instances, as the Board of Directors may elect.
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4.15 Inspection of Records. Every Director shall have the
absolute right at any reasonable time to inspect all books,
records, documents of every kind, and the physical properties, of
the Company and of its subsidiaries. Such inspection may be made
personally or by an agent and includes the right to make copies and
extracts.
4.16 Executive Committee. (a) The Board of Directors may, by
resolution adopted by a majority of the whole Board, appoint two or
more of its members to constitute an Executive Committee. One of
such directors shall be designated as Chairman of the Executive
Committee. Each member of the Executive Committee shall continue as
a member thereof until the expiration of his term as a director, or
until his earlier resignation from the Executive Committee, in
either case unless sooner removed as a director or member of the
Executive Committee by any means authorized by the Charter or
herein.
(b) The Executive Committee shall have and may exercise,
to the extent provided in such resolution and except as prohibited
by law, all of the rights, power and authority of the Board of
Directors.
(c) The Executive Committee shall fix its own rules of
procedure and shall meet at such times and at such place or places
as may be provided by its rules. The Chairman of the Executive
Committee, or in the absence of the Chairman, a member of the
Executive Committee chosen by a majority of the members present,
shall preside at all meetings of the Executive Committee, and
another member thereof chosen by the Executive Committee shall act
as Secretary. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the
affirmative vote of a majority of the members thereof shall be
required for any action of the Executive Committee. The Executive
Committee shall keep minutes of its meetings and deliver such
minutes to the Board of Directors.
4.17 Other Committees. The Board of Directors may, by
resolution duly adopted by a majority of directors at a meeting at
which a quorum is present, appoint an audit committee, compensation
committee, and such other committee or committees as it shall deem
advisable and with such limited authority as the Board of Directors
shall from time to time determine.
4.18 Other Provisions Regarding Committees. (a) The Board of
Directors shall have the power at any time to fill vacancies in,
change the membership of, or discharge any committee. The members
of any committee present at any meeting of a committee, whether or
not they constitute a quorum, may appoint a director to act in the
place of an absent member.
(b) Members of any committee shall be entitled to such
compensation for their services as such as from time to time may be
fixed by the Board of Directors and in any event shall be entitled
to reimbursement of all reasonable expenses incurred in attending
committee meetings. Any member of a committee may waive
compensation for any meeting. No member of a committee who receives
compensation as a member of one or more committees shall be barred
from serving the Company in any other capacity or from receiving
compensation and reimbursement of reasonable expenses for any or
all such other services.
(c) Unless otherwise prohibited by law, the provisions
above concerning action by written consent of directors and
meetings of directors by telephonic or similar means shall apply to
all committees from time to time created by the Board of Directors.
4.19 Reliance on Accounts and Reports, etc. A Director, or
a member of any Committee designated by the Board of Directors
shall, in the performance of this duties, be fully protected in
relying in good faith upon the records of the Company and upon
information, opinions, reports or statements presented to the
Company by any of the Company's officers or employees, or
Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are
within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of
the Company.
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ARTICLE V
Officers and Agents
5.01 Positions. The Company's officers generally shall
be chosen by the Board of Directors and shall consist of a Chairman
of the Board, a President, one or more Vice Presidents if desired,
a Secretary and a Treasurer. The Board of Directors may appoint one
or more other officers, assistant officers and agents as it from
time to time deems necessary or appropriate, who shall be chosen in
such manner and hold their offices for such terms and have such
authority and duties as from time to time may be determined by the
Board of Directors. The Board may delegate to the Chairman of the
Board the authority to appoint any officer or agent of the Company
and to fill a vacancy other than the Chairman of the Board or
President. Any two or more offices may be held by the same person,
except that no person may simultaneously hold the offices of
President and Secretary and of President and Vice President. In all
cases where the duties of any officer, agent or employee are not
prescribed by these bylaws or by the Board of Directors, such
officer, agent or employee shall follow the orders and instructions
of the President.
5.02 Term of Office; Removal Each officer of the Company shall
hold office at the pleasure of the Board and any officer may be
removed, with or without cause, at any time by the affirmative vote
of a majority of the directors then in office; provided, that any
officer appointed by the Chairman of the Board pursuant to
authority delegated by the Board may be removed, with or without
cause, at any time by the Chairman whenever the Chairman in his or
her absolute discretion shall consider that the Company's best
interests shall be served by such removal. Removal of an officer by
the Board (or the Chairman, as the case may be) shall not prejudice
the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not in itself create
contract rights.
5.03 Vacancies. A vacancy in any office, however occurring,
may be filled by the Board or the Executive Committee, for the
unexpired portion of the term by majority vote of its members, or
by the Chairman of the Board in the case of a vacancy occurring in
an office to which the Chairman has been delegated authority to
make appointments.
5.04 Compensation. The salaries of all officers of the Company
shall be fixed from time to time by the Board, and no officer shall
be prevented from receiving a salary by reason of the fact that he
also receives compensation from the Company in any other capacity.
5.05 Chairman of the Board. The Chairman of the Board
("Chairman'), if such officer shall be chosen by the Board of
Directors, shall preside at all meetings of the Board of Directors
and meetings of shareholders at which he is present and shall
exercise general supervision and direction over the implementation
of Board policy affecting the affairs of the Company. Any act which
may be performed by the Chief Executive Officer or President may be
performed by the Chairman.
5.06 Chief Executive Officer. The Chairman of the Board shall,
unless the Board determines otherwise, serve as the Chief Executive
Officer ("CEO") of the Company. If the Chairman is not designated
the CEO, then the President shall serve as CEO. 'Me Board may, from
time to time, designate from among the executive officers of the
Company an officer to serve as Chief Operating Officer ("COO") of
the Company. A person designated to serve in the capacity of CEO or
COO shall serve at the pleasure of the Board.
A person designated Chief Executive Officer (CEO) shall have
primary responsibility for and active charge of the management and
supervision of the Company's business and affairs. The CEO may
execute in the name of the Company authorized corporate obligations
and other instruments, shall perform such other duties as may be
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prescribed by the Board (or Chairman, as the case may be) from time
to time and, in the absence or disability of the President, shall
exercise all of the duties and powers of the President. In the
event that the President is not the CEO, then the CEO shall
supervise the performance of the President and shall be responsible
for the execution of the policies and directives of the Board. The
CEO shall report directly to the Board. The CEO shall perform such
other duties as may be assigned by the Board (or Chairman, as the
case may be). The CEO may perform any act which might be performed
by the President.
5.07 President The President shall have general active
management of the business of the Company, subject to the authority
of the Chief Executive Officer if the President is not designated
as such, and general supervision of its officers, agents and
employees. In the absence of the Chairman and Chief Executive
Officer, he shall preside at all meetings of the shareholders and
of the Board. In the absence of a designated Chief Executive
Officer he shall see that all policies and directives of the Board
are carried into effect.
He shall, unless otherwise directed by the Board of Directors,
attend in person or by substitute appointed by him, or shall
execute in behalf of the Company written instruments appointing a
proxy or proxies to represent the Company, at all meetings of the
stockholders of any other company in which the Company shall hold
any stock. He may, on behalf of the Company, in person or by
substitute or by proxy, execute written waivers of notice and
consents with respect to any such meetings. At all such meetings
and otherwise, the President, in person or by substitute or proxy
as aforesaid, may vote the stock so held by the Company and may
execute written consent and other instruments and power incident to
the ownership of said stock, subject however to the instructions,
if any, of the Chairman or the Board of Directors. 'Me President
shall have custody of the Treasurer's bond, if any.
5.08 Executive Vice President The Executive Vice President
shall assist the President in the discharge of supervisory,
managerial and executive duties and functions. In the absence of
the President or in the event of his death, or inability or refusal
to act, the Executive Vice President shall perform the duties of
the President and when so acting shall have the duties and powers
of the President. He shall perform such other duties as from time
to time may be assigned to him by the President, Chairman or Board
of directors.
5.08 Vice Presidents. The Vice Presidents, if any, shall
assist the President and Executive Vice President and shall perform
such duties as may be prescribed by the Board, the Chairman or the
President. Vice Presidents in the order of their seniority shall,
in the absence or disability of the Chairman and President,
exercise all of the duties and powers of such officers. The
Executive Vice President if any, shall be the most senior of Vice
Presidents, and the Senior Vice President if any, shall be the next
most senior of Vice Presidents. In regard to other Vice Presidents,
they shall have the respective ranks designated by the Board of
Directors, or if none has been so designated, as designated by the
Chairman, or if none has been so designated by the Chairman, they
shall rank in the order of their respective elections to such
office. The execution of any instrument on the Company's behalf by
a Vice President shall be conclusive evidence, as to third parties,
of his authority to act in the stead of the President and Executive
Vice President.
5.09 Secretary. The Secretary shall: (i) keep the minutes of
the proceedings of the shareholders and the Board of Directors and
record all votes and proceedings thereof in a book kept for that
purpose; (ii) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (iii) be
custodian of the corporate records and of the seal of the Company
and affix the seal to all documents when authorized by the Board of
Directors; (iv) keep at its registered office or principal place of
business within or outside Delaware a record containing the names
and addresses of all shareholders and the number and class of
shares held by each, unless such a record shall be kept at the
office of the Company's transfer agent or registrar; (v) sign with
the President, or a Vice President, certificates for shares of the
Company, the issuance of which shall have been authorized by
resolution of the Board of Directors; (vi) have general charge of
the stock transfer books of the Company, unless the Company has a
transfer agent; and (vii) in general, perform all duties incident
to the office of Secretary and such other duties as from time to
time may be assigned to him by the President or the Board of
Directors. The Board of Directors may give general authority to
officers other than the Secretary or any Assistant Secretary to
affix the Company's seal and to attest the fixing thereof by his or
her signature.
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5.10 Assistant Secretary. The Assistant Secretary, if any (or
if there is more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of
their appointment), in the absence or disability of the Secretary,
shall perform the duties and exercise the powers of the Secretary.
The Assistant Secretary(ies) shall perform such other duties and
have such other powers as from time to time may be prescribed by
the Board, the Chairman or the Chief Executive Officer. The
Chairman may appoint one or more Assistant Secretary(ies) to
office.
5.11 Treasurer. The Treasurer shall, unless the Board
otherwise resolves, be the principal financial officer and
principal accounting officer of the Company and shall have the care
and custody of all funds, securities, evidence of indebtedness and
other valuable effects of the Company, shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Company and shall deposit all money and other valuable effects of
the Company in the name and to the credit of the Company in such
depositories as from time to time may be designated by the Board.
'Me Treasurer shall disburse the funds of the Company in such
manner as may be ordered by the Board from time to time and shall
render to the Chairman of the Board, the President and the Board,
at regular Board meetings or whenever any of them may so require,
an account of all transactions and of the Company's financial
condition.
5.12 Assistant Treasurer. The Assistant Treasurer, if any (or
if there is more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation, in the order of
their appointment), in the absence or disability of the Treasurer,
shall perform the duties and exercise the powers of the Treasurer.
The Assistant Treasurer(s) shall perform such other duties and have
such other powers as from time to time may be prescribed by the
Board, the Chairman or the Chief Executive Officer. The Chairman
may appoint one or more Assistant Treasurer(s) to office.
5.13 Resignations. Any officer may resign at any time by
giving written notice to the Board or to the Chairman. Such
resignation shall take effect at the time specified therein and,
unless specified therein, no acceptance of the resignation shall be
required for the resignation to be effective.
5.14 Delegation of Duties. In the event of the absence or
disability of any officer of the Company, or for any other reason
the Board shall deem sufficient, the Board may temporarily
designate the powers and duties, or particular powers and duties,
of such officer to any other officer, or to any director.
5.13 Fidelity Bonds. The Board of Directors shall have the
power, to the extent permitted by law, to require any officer,
agent or employee of the Company to give bond for the faithful
discharge of his duties in such form and with such surety or
sureties as the Board deems advisable.
ARTICLE VI
Indemnification
Every Director, officer, employee and agent of the Company, and
every person serving at the Company's request as a director,
officer (or in a position functionally equivalent to that of
officer or director), employee or agent of another corporation,
partnership, joint venture, trust or other entity, shall be
indemnified to the extent and in the manner provided by the
Company's Charter, as it may be amended, and in the absence of any
such provision therein, in accordance with Nevada law.
ARTICLE VII
Execution of Instruments and Deposit of Corporate Funds
7.01 Execution of Instruments Generally. The Chairman of the
Board, the President, any Vice President, the Secretary or the
Treasurer, subject to the approval of the Board of Directors, may
enter into any contract or execute and deliver any instrument in
the name and on behalf of the Company. The Board of Directors may
authorize any officer or officers, or agent or agents, to enter
into any contract or execute and deliver any instrument in the name
and on behalf of the Company, and such authorization may be general
or confined to specific instances.
12
<PAGE>
7.01 Borrowing. Unless and except as authorized by the Board
of Directors, no loans or advances shall be obtained or contracted
for, by or on behalf of the Company, and no negotiable paper shall
be issued in its name. Such authorization may be general or
confined to specific instances. Any officer or agent of the Company
thereunto so authorized may attain loans and advances for the
Company and for such loans and advances may make, execute and
deliver any promissory notes, bonds, or other evidences of
indebtedness of the Company. Any officer or agent of the Company so
authorized may pledge, hypothecate or transfer as security for the
payment of any and all loans, advances, indebtedness and
liabilities of the Company, any and all stocks, bonds other
securities and other personal property at any time held by the
Company, and to that end may endorse, assign and deliver the same
and do every act and thing necessary or proper in connection
therewith.
7.03 Deposits. All funds of the Company not otherwise
employed shall be deposited from time to time to its credit in such
banks or trust companies or with such bankers or other depositories
as the Board of Directors may select, or as may be selected by any
officer or officers or agent or agents authorized to do so by the
Board of Directors. Endorsements for deposit to the credit of the
Company in any of its duly authorized depositories shall be made in
such manner as the Board of Directors from time to time may
determine.
7.04 Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, and all notes or other evidence of
indebtedness issued in the name of the Company, shall be signed by
such officer or officers or agent or agents of the Company and in
such manner as the Board of Directors from time to time may
determine.
7.05 Proxies. Proxies to vote with respect to shares of
stock of other corporations owned by, or standing in the name of,
the Company may be executed and delivered from time to time on
behalf of the Company by the Chairman of the Board, the President
or any Vice President or by any other person or persons thereunto
authorized by the Board of Directors.
ARTICLE VIII
Miscellaneous
8.01 Declaration of Dividends. The Board of Directors at any
regular or special meeting may declare dividends payable, whenever
in the exercise of its discretion it may deem such declaration
advisable and such is permitted by law. Such dividends may be paid
in cash, property, or shares of the Company.
8.02 Benefit Plans. Directors shall have the power to install
and authorize any pension, profit sharing, stock option, stock
award or stock bonus, insurance, welfare, educational, bonus,
health and accident or other benefit program which the Board deems
to be in the interest of the Company, at the expense of the
Company, and to amend or revoke any plan so adopted. Any such plan
may adopted and have full force and effect by resolution of the
Board of Directors, except where applicable laws, rules or
regulations require prior approval of the Company's shareholders of
such plan in order for the plan to be valid.
8.03 Seal. The corporate seal of the Company shall be circular
in form and shall contain the name of the Company, the year
incorporated and the words "Seal" and "Nevada".
8.04 Fiscal Year. The Board of Directors shall have the power
to fix, and from time to time change, the fiscal year of the
Company. Any such adoption of or change in a fiscal year shall not
constitute or require an amendment to these Bylaws.
13
<PAGE>
8.05 Amendment of Bylaws. These Bylaws may be amended or
repealed in the manner provided for in the Charter, or if none is
there provided: by majority vote of the Board of Directors, taken
at any meeting or by written consent, subject to the shareholders'
right to change or repeal any Bylaws so made or adopt new Bylaws by
vote of at least a majority of the total voting power. Bylaws
amendments may be proposed by any Director or shareholder. Any
action duly taken by the Board or the shareholders which conflicts
or is inconsistent with these Bylaws (as they may be amended) shall
constitute an amendment of the Bylaws, if the action was taken by
such number of directors or shares voting as would be sufficient
for amendment of the Bylaws.
8.06 Gender. The masculine gender is used in these Bylaws as
a matter of convenience only and shall be interpreted to include
the feminine and neuter genders as the circumstances indicate.
8.07 Conflicts. In the event of any irreconcilable conflict
between these Bylaws and either the Company's Charter or applicable
law, the latter shall control.
8.08 Definitions. Except as these Bylaws otherwise
specifically provide, all terms used in these Bylaws shall have the
definitions given them in the Company's Charter or the Nevada
General Corporation Law.
ARTICLE IX
Notices
9.01 Receipt of Notices by the Company. Notices, shareholder
writings consenting to action, and other documents or writings
shall be deemed to have been received by the Company when they are
actually received: (i) at the registered office of the Company in
Nevada; (ii) at the principal office of the Company (as designated
in the most recent document filed by the Company with the Nevada
Secretary of State designating a principal office) addressed to the
attention of the Secretary of the Company; (iii) by the Secretary
of the Company wherever the Secretary may be found; or (iv) by any
other person authorized from time to time by the Board of Directors
or the President to receive such writings, wherever such person is
found.
9.02 Giving of Notice. Except as otherwise provided by the
General Corporation Law of Nevada, these Bylaws, the Charter or
resolution of the Board of Directors, every meeting notice or other
notice, demand, bill, statement or other communication
(collectively, "Notice') from the Company to a Director, Officer or
shareholder shall be duly given if it is written or printed and is
(i) sent by first class or express mail, postage prepaid, (ii) sent
by any commercial overnight air courier service, such as DHL,
Federal Express, Emery, Airborne, UPS or similar service, (iii)
sent by telegraph, cablegram, telex, telecopier, facsimile or
similar transmission, (iv) delivered by any commercial messenger
service which regularly retains its receipts, or (v) personally
delivered, provided a receipt is obtained reflecting the date of
delivery. Notice shall not be duly given unless all delivery or
postage charges are prepaid. Notice shall be given to an
addressee's most recent address as it appears on the Company's
records or to such other address as has been provided in writing to
the Secretary. A Notice shall be deemed "given" when dispatched for
delivery, when personally delivered, when transmitted
electronically, or if mailed, on the date postmarked. This Section
shall not have the effect of shortening any notice period provided
for in these Bylaws.
9.03 Waiver of Notice. Any Notice required or permitted by the
General Corporation Law of Nevada, the Charter or these Bylaws may
be waived in writing at any time by the person entitled to the
Notice, and such waiver shall be equivalent to the giving of
notice. Notice of any shareholders' meeting shall be waived by
attendance, in person or by proxy, at the meeting, unless any
question of lack of or defect in a Notice is raised prior to
conclusion of the meeting. A waiver of Notice of a special meeting
of shareholders shall state the purpose for which the meeting was
called or the business to be transacted thereat.
APPROVED AND ADOPTED by the Board of Directors as of this 11th
day of November, 1997.
14
<PAGE>
SECRETARY'S CERTIFICATION
I, the undersigned Secretary of this corporation, hereby certify
that the foregoing Bylaws were duly adopted by its Board of
Directors on the date above indicated and that the foregoing text
of the Bylaws are currently in full force and effect and have not
been revoked, suspended or amended.
Dated: MED GEN, INC.
November 11, 1997 /s/
Secretary
(SEAL)
15
<PAGE>
Law Office of Gregory Bartko 3475 Lenox Road
Suite 400
Atlanta, Georgia 30326
Phone 404-238-0550
Fax 404-238-0551
September 2, 1998
Liberty Stock Transfer Co.
Attention: Al Sanders
191 New York Avenue
Huntington, New York 11743
Re: Med Gen, Inc.
Offering of 400,000 Shares
Dear Mr. Sanders,
I am securities counsel for Med Gen, Inc., of Deerfield Beach, Florida
(the "Company"). I am advised that the Company previously completed an
offering of 400,000 shares of its Common Stock ("Offering"), in accordance
with the provisions of Rule 504 of Regulation D promulgated under the
Securities Act of 1933, as amended ("Act"). In accordance with the Act, a
Form D Notice of Sale reflecting the Offering was filed with the United
States Securities and Exchange Commission ("SEC") in November, 1997.
All of the purchasers of the Common Stock in the Offering were residents
of various states within the United States, and each purchaser of the
Shares in the Offering represented that they were purchasing the Shares
for investment only and not with a view to re-distribute the securities.
However, pursuant to the provisions of Rule 504 of Regulation D of the
Act, the Shares of Common Stock offered and sold in the Offering are
"free trading" Shares and, accordingly should bear no limitations on
transfer of the Shares under federal securities laws. Attached hereto
please find a listing of the names, addresses, and number of Shares each
such investor in the Offering purchased. Common Stock certificates
representing their investments may be issued without a restrictive
legend placed thereon.
Please contact me at 404-238-0550 if you have any questions or comments.
Sincerely
/s/Gregory Bartko
GAB/mnm
cc: Paul B. Kravitz, Med Gen, Inc.
Alan Berkun, Preston Langley
AGREEMENT
AGREEMENT made this 26 day of March, 1998, between
INTERNATIONAL CHEMICAL CORPORATION d/b/a INNOVATIVE CHEMICAL
CORPORATION ("ICC" ), a New York Corporation, with offices at 55
Woodridge Drive, Amherst NY 14228, and Med Gen ("MG"), a Nevada
Corporation, with offices at 680 South Military Trail, Deerfield
Beech, Florida 33442.
RECITALS
WHEREAS, ICC is engaged in the development and manufacture
of private label and specialty products which are distributed
worldwide, and
WHEREAS, ICC and MG desire to enter into an Agreement where
they mutually benefit to allow for greater production and
distribution of certain hereinafter named products (Schedule
"A"), pursuant to certain terms and conditions as hereinafter set
forth.
NOW, therefore, in consideration of the mutual promises and
covenants set forth herein, ICC and MG agree as follows:
1. ICC at its expense will be responsible for developing
satisfactory formulas for the products and for providing samples
of the products in sufficient quantities to allow MG at its
expense to complete testing of the products. MG will provide test
results to ICC and assist ICC in developing improvements on said
formulas.
2. Any patent rights or trade mark rights which arise from
development of the products shall be jointly owned by ICC and MG.
Any expenses incurred by the parties in order to perfect any such
patent or trade mark rights shall be borne equally. Neither party
shall incur any such expense without further securing the
authorization of the other party. The inability or failure to
secure a patent or trade mark on the product shall not in any way
effect ICC's rights to continue as the exclusive manufacturer of
the product as hereinafter agreed.
3. During the term of this Agreement, MG. shall be the
sole and exclusive marketer of the developed products. Each party
shall use its best efforts to fulfil its obligations. Further,
ICC agrees to use its contacts to assist MG in marketing the
developed products and during the term of this contract will not
manufacture, market, sell or participate in any venture that will
compete with the developed product(s), unless as agreed in
writing by both parties and noticed in a Schedule B to be
attached to this Agreement and form a permanent part thereof.
4. ICC shall sell product(s) to MG at a price to be pre-
agreed upon by both parties. Any further price increases
necessitated by future cost escalations must be proposed and
agreed to in writing 30 days in advance. Further, ICC shall be
entitled to a commission of 5% of MG revenues emanating from
sales made to ICC produced contacts as discussed in paragraph #3
above. Contacts shall be agreed upon both parties in writing and
form a Schedule C which shall become a permanent part of this
/s/ /s/
<PAGE>
Agreement. Payment terms on products ordered by MG from ICC shall
be within 30 days with no allowable discounts for prompt
payments.
5. This Agreement shall remain in full force and effect as
long as the parties shall jointly own rights to and/or to
products. Provisions for buyout of one or the others rights or
patents or trade secrets or otherwise joint ownership in.
products shall be by mutual Agreement only and evidenced by
separate documentation and such transfer will, in effect, cancel
the rights that are the subject of this Agreement.
6. This Agreement shall be binding on and inure to the
benefit of any successors, assignees and personal representatives
of the parties and shall be governed by and construed under the
laws of the State of New York. All notices or other
communications from either party to the other hereunder shall be
in. writing and shall be deemed given when delivered either
personally or when deposited in the U.S. Mail, certified or
registered, with return receipt requested addressed to the
applicable party at the address set forth above.
7. In the event that ICC shall not be able to produce,
within 30 days the required volume as evidenced by bona fide
orders submitted by MG, the cure shall be as follows and in this
order.
A. ICC shall identify and contract with a sub-manufacturer
to provide the necessary product at the same cost to MG as
charged by ICC.
B. Should ICC fail in its attempt to secure the additional
supply to fulfill MG s requirements, ICC shall wave the
requirements set forth in. Para 4 thus enabling MG to satisfy it
own requirements. All other covenants to this Agreement shall
remain in full force and effect. When ICC s production
capabilities return to normal and the ability to supply MG's
requirements can be met, the provisions in Para. #4 shall prevail.
8. In the event the party's come to a dispute that cannot
be settled amongst themselves, both party's shall submit to
binding arbitration. Each party shall pay its own expenses and
they shall equally share the costs of the arbitrator.
INTERNATIONAL CHEMICAL MED GEN
CORPORATION d/b/a INNOVATIVE
CHEMICAL CORPORATION
BY:/s/Gary Robinson Date 3-26-98 BY:/s/ Date 3 27 98
Gary Robinson
President
<PAGE>
SCHEDULE "A"
------------
PRODUCTS
Snorenz - Anti Snoring Product
SCHEDULE "B"
------------
EXCEPTIONS TO PARAGRAPH 3 EXCLUSIVITY PROVISIONS
SCHEDULE "C"
------------
CONTACTS
SALES MARKETING AND DISTRIBUTION AGREEMENT
AGREEMENT made, as of this 13th day of August, 1999 (the
"Agreement") by and between Med Gen Inc., ("MGI") a corporation
organized and existing under the laws of the State of Nevada
having its principal address at 2501 Davie Road, Suite 230,
Davie, Florida 33317 ("Med Gon Inc.") and Allergy Research
Laboratories, LLC, 125 Promenade Court, Louisville, Kentucky
40223 a corporation organized under the laws of the
Commonwealth of Kentucky ("Manufacturer" or "ARL")
W I T N E S S E T H:
WHEREAS, MGI has represented to ARL that it wishes to obtain
exclusive sales, marketing and distribution products to the
existing Sneeze No More product, and;
WHEREAS, MGI has, at its expense, produced an infomercial
which It proposes to air nationally and/or internationally to
promote the sales of ARL s existing product line, and;
WHEREAS, ARL is desirous of sailing its existing product
line and assigning its rights and duties under certain
contractual obligation. to MGI, and;
WHEREAS, ARL is willing to grant MCI an exclusive worldwide
sales, marketing dnd distribution rights as set out herein.
FOR GOOD AND VALUABLE CONSIDERATION AND IN EXCHANGE FOR THE
MUTUAL PREMISES CONTAINED HEREIN, IT IS HEREBY MUTUALLY AGREED AS
FOLLOWS:
1. APPOINTMENT:
(a) On the terms and conditions set forth below, and in
consideration of the mutual Covenants contained herein,
Manufacturer appoints MCI as its exclusive sales, marketing and
distribution agent as more particularly explained in Exhibit A
attached hereto and made a part of this Agreement. This Agreement
pertains to the Sneeze No More product line end other products
that ARL might so designate by addendum to this contract.
(b) MGI agrees to pay ARL under the terms and conditions as
set forth in the PRICE SCHEDULE that is made a part of this
Agreement.
2. CHARGEBACKS:
Should the product be defective, or packaged defectively by
ARL, then in that event, MGI will notify ARL in writing of such
event and MCI return the product to ARL for full credit not to
exceed the purchase price from ARL to MGI.
3. TERRITORY:
During the term of this Agreement, MGI may solicit orders
for the Products from accounts worldwide and will have exclusive
rights for sales, marketing and distribution as represented by
this Agreement (see Exhibit A). Notwithstanding this grant of
exclusivity, ARL has contractual commitments and obligations and
reservations of certain markets as disclosed in Exhibit "A". ARL
is willing to assign the Amway account to MGI by separate
agreement which shall require MGI to indemnify and hold harmless
ARL for the performance of its obligations thereunder.
4. TERM AND TERMINATION:
The term of this Agreement shall commence on the date above
and continue in force until terminated pursuant to Paragraph 5.
<PAGE>
5. TERMINATION:
(a) No party may terminate this Agreement without
giving the other party sixty (60) days written notice unless
termination is caused by acts that would cause irreparable harm
to either MGI or Manufacturer.
(b) Notwithstanding the-provisions of subparagraph (a),
either party may terminate this Agreement upon twenty-four (24)
hours written notice if a trustee or receiver is appointed for
or applied for by the other party, or if the other party ceases
to function as a going business or to conduct operations in
the normal course of business as contemplated by this Agreement.
(c) Notwithstanding anything to the contrary, in this
Agreement in the event of termination of this Agreement, for
any reason, MCI shall be obligated to pay Manufacturer for any
invoices outstanding and due.
6. RESPONSIBILITIES OF MGI AND MANUFACTURER:
MCI agrees that it will observe and strictly adhere to
the following requirements: (1) no oral or written statement
will be made to any prospective purchaser of Manufacturers
products which is contrary to the facts end provisions set
forth in the promotional material supplied to MCI from time
to time by Manufacturer.
Manufacturer agrees that it will supply MCI with
documentation that will support the manufacturer claims and
representations. Further, Manufacturer will hold MCI
harmless for any actions, legal or otherwise, emanating
from claims and representations made by Manufacturer to MGI
and provided for in the documentation delivered to MCI
supporting sold claims and representations. Manufacturer
further agrees that it will pay all costs, including court
costs and attorney's fees should MCI incur any judgment
based upon finding that Manufacturers claims were false or
misleading.
7. MUTUAL IDEMNIFICATION:
Manufacturer shall Indemnify and hold MGI harmless
from and against any and all judgements which result claims,
demands, loss or damage arising out of copyright and/or
trademark infringement or impure, adulterated, mislabeled,
misbranded or defective Products sold by ARL to MGI prior
to or during the term of this Agreement or any other claim
relating to the Product not directly caused by the
negligence of MGI, including without limitation, reasonable
expanses and/or attorneys fees expended by MGI in the
defense of the claim which results in a judgment.
MGL shall indemnify and hold Manufacturer free and
harmless from and against any and all claims, demands, loss
or damage in any way arising out of, or based upon claim,
arising out of the actions that MCI might have made
relating to the sale and/or distribution of products
manufactured by ARL. Specifically, claims that are made and
are not authorized by Manufacturer on Infomercials, radio
broadcasts and other advertising materials produced, but
not approved by Manufacturer including reasonable expenses
and/or attorney s fees expended by Manufacturer in the
investigation or defense of any claim.
8. COMPETITORS REPRESENTED:
MGI agrees that while this contract is in full force
and effect, MGI will not offer for sale, distribution or
otherwise market a like product.
9. INDEPENDENT CONTRACTOR:
MCI represents that It is an Independent Contractor
and as such is not under the direct control of the
Manufacturer. MGI agrees to pay for its own expenses and
other related expenses and costs in the daily running of
its business; and, unless, expressly provided for in a
separate-agreement, such as industry conferences and
conventions, the Manufacturer will not be made responsible
for any of these expenses unless provided for in writing
and signed by both parties.
<PAGE>
10. RIGHT OF FIRST REFUSAL:
ARL agrees to allow MGI the right of first refusal in
the marketing/distribution and sales of any new products
developed by the Manufacturer. MGI will be given three (3)
months to produce a suitable marketing plan for the
contemplated product(s).
11. NOTICE:
Any notice required herein to be given In writing
shall be sent by regular or overnight mull or faxed to the
other party as follows:
If to Med Gen Inc.:
Med Gen Inc.
Attn: Paul S. Mitchell
2501 Davie Road, Suite 230
Davie, FL 33317
If to Allergy Research Laboratories, LLC:
Allergy Research Laboratories, LLC
Attn: Ron Goodbub, President
P.0. Box 2606
Duluth, GA 30090
12. COMPLIANCE WITH APPLICABLE LAW:
The parties each agree that in performing their
respective obligations under this Agreement, they will comply
with all applicable federal, state and local statutes, rules
and regulations.
13. MISCELLANEOUS PROVISIONS:
(a) Neither party to the Agreement is an agent,
representative or employees of the other, but rather is an
independent business and all obligations of any kind by
either party are the sole obligations of the party incurring
the obligation.
(b) This Agreement shall be construed and interpreted
in accordance with arid shill be governed by the laws of the
Commonwealth of Kentucky.
(c) This Agreement is not assignable by either party.
(d) The terms of this Agreement can only be changed
amended or modified In writing signed by duly authorized
individuals of both parties.
(e) MGI and Manufacturer agrees that this Agreement
end any applicable schedules will be the complete and
exclusive statement of the Agreement, between the parties,
superseding all proposals or prior agreements, oral or
written, and all other communications between the parties
relating to the subject matter hereof.
(f) Both parties will initial each page of this
Agreement, Including Schedule "A" and "B".
14. FORCE MAJEURE:
Neither party shall be considered to be in default In
the performance of Its obligations under this Agreement, to
the extent that the performance, of any much obligation is
prevented or delayed by any cause, which is beyond the
reasonable control of the affected party.
<PAGE>
15. SALES FORECASTING:
MGI shall communicate to ARL its best estimate of sales
forecast as they become available. MGI end ARL recognize the
difficulty In formulating such forecasts and ARL shall apprise
MGI of its production capabilities. Presently MGI has estimated
sales per week up to 250,000 units per week. ARL will need up to
eight (8) weeks to establish production capacities at this higher
range. The parties agree to work in concert during the term of
this Agreement so that MGI can provide sufficient lead time to
ARL in order for ARL to expand production requirements beyond
those presently forecast.
16. COUNTERPARTS:
This Agreement may be executed in several counterparts, and
all so executed shall constitute one agreement, binding on each
of the parties, notwithstanding that all the parties are not
signatory to the original or the same counterpart.
Allergy Research Med Gen, Inc.
Laboratories, LLC
By: Ron Goodbub By: Paul S. Mitchell
Title: President Title: President
Signature: /s/Ron Goodbub Signature:/s/Paul S. Mitchell
Date: 9/20/99 Date: 9/17/99
Witness: /s/ Witness: /s/
<PAGE>
EXHIBIT A
---------
Territory
Sales Number: LC-152
Electronic Media: (Television, Radio, and Direct Sales-Mail Order)
Exclusive worldwide distribution rights. Exceptions
1. Amway Contract assigned only during the term of this
Agreement to MGI.
2. Those markets reserved to SF1, Inc. (the-Licensor) such
as physicians, medical catalogues, etc. Specific
markets excluded available on request.
3. Marketing through the internet or worldwide web shall
be assigned to MGI during the term Agreement by separate
agreement mutually satisfactory to both parties.
<PAGE>
EXHIBIT B
---------
TERMS OF SALE
Price List
Item Item Description Size Bottle w/sprayer
- ----------------------------------------------------------------------
10001 Sneeze No More-Plants Pint $3.15
20001 Sneeze No More-Cats - -
30001 Sneeze No More-Dogs - -
40001 Sneeze No More-Dust Mite - -
50001 Sneeze No More-Cockroach - -
60001 Sneeze No More-Mold & - -
Mildew
PRICE: ARL guarantees all pricing for one year from date
of acceptance of this contract. Price includes 15 oz white
bottle, front und back label (as provided). Liquid product
as described on Label Cap. Packed 12 bottles in a
cardboard box.
FRIEIGHT: F.O.B. Factory (Louisville, KY)
ALLOWANCES AND QUANITITY DISCOUNTS: NONE
MINIMUM ORDER: Full Pallets consisting of 72 cases packed 12
pint bottles per box-Pallets may be mixed full cases of
separate, product per box.
PAYMENT TERMS: 10% PRE-PAYMENT WITH ORDER. Balance due net
30 days. Unpaid balances over 30 days shell bear interest at
the rate of 1-1.2% per month (18% per annum) and MGI shall
be responsible for costs of collection including reasonable
attorney s fees incurred by ARL to collect any unpaid balances.
WARRANTIES: ARL warrants to the end user a money back
guarantee which it will honor upon proof of purchase and
return to MGI by an end user. ARL's warranty is limited
solely to the purchase price of the product to MGI and
return of the product to ARL F.O.B. Manufacturer.
The express warranty above is given in lieu of all
other warranties, express or implied, whether statutory or
otherwise. ARL shall not be liable for any damages whether
in contract or tort. Damages are limited to the return of
the purchase price as set out above. ARL shall not be
liable for any other injury or loss, damage or expense
whether direct or consequential, including but not limited
to, loss of income, lost profits or loss of use.
<PAGE>
EXHIBIT C
---------
TERMINATION
The undersigned, John Ziglar individually and on behalf
of Ziglar Marketing, hereby terminates the agreement executed on
7/15/99 between Allergy Research Laboratories, LLC and Ziglar
Marketing.
/s/John Ziglar
JOHN ZIGLAR
ZIGLAR MARKETING
BY: /s/John Ziglar
JOHN ZIGLAR
MED GEN INC.[TM]
Sales Marketing and Distribution Agreement
------------------------------------------
AGREEMENT made as of this 25th day of August, 1999 (the "Agreement") by
and between Med Gen Inc., ("MGI") a corporation organized and existing
under the laws of the State of Nevada having its principal address at
2501 Davie Road, Suite 230, Davie, Florida 33317 and Reshet Inc. of
Wave Guard, located at 584 Sanderling Court, Secaucus, NJ 07094 a
New Jersey Corporation organized under the laws of the State Of New
Jersey ("Manufacturer" or "WG")
1. APPOINTMENT:
(a) On the terms and conditions set forth below, and in
consideration of the mutual Covenants contained herein,
Manufacturer appoints MGI as its exclusive sales, marketing
and distribution agent as more particularly explained in
"Exhibit A" attached hereto and made a part of this Agreement.
This Agreement pertains to the WG product line and other
products that WG might so designate by addendum to this
contract.
(b) MGI. agrees to pay WG under the terms and conditions as
set forth in the PRICE SCHEDULE that is made a part of this
Agreement.
2. CHARGEBACKS
Should the product be determined to be defective or in a
condition that prohibits MGI from distributing the product
as intended, MGI will notify WG in writing of such event and
MGI will return this product to WG for full credit,
including any extraordinary charges that might have been
caused by the products defectiveness.
3. TERRITORY
During the term of this Agreement, MGI may solicit orders
for the Products from accounts nationwide and MGI will own
the rights to the Internet and will have exclusive rights
for sales, marketing and distribution as represented by this
Agreement (see Exhibit A).
- --------------------------------------------------------------------------
2501 Davie Road, Suite 230, Davie, FL 33317 954-423-2525 954-423-9612-Fax
email: [email protected] www.snorenz.com
<PAGE>
4. TERM AND TERMINATION
The term of this agreement shall commence on the date
above and continue in force until terminated pursuant to
Paragraph 5.
5. TERMINATION
(a) No Party may terminate this agreement without giving
the other party sixty (60) days written notice unless
termination is caused by acts that would cause irreparable
harm to either MGI or Manufacturer.
(b) Notwithstanding the provisions of subparagraph (a),
either party may terminate this Agreement upon twenty-four
(24) hours written notice if a trustee or receiver is
appointed for or applied for by the other party, or if the
other party ceases to function as a going business or to
conduct operations in the normal course of business as
contemplated by this Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement in the event of termination of this Agreement, for
any reason, MGI shall be obligated to pay Manufacturer for
any invoices outstanding and due.
6. RESPONSIBILITIES OF MGI and Manufacturer
MGI agrees that it will observe and strictly adhere to the
following requirements: (1) no oral or written statement
will be made to any prospective purchaser of Manufacturer s
products which is contrary to the facts and provisions set
forth in the promotional material supplied to MGI from time
to time by Manufacturer.
Manufacturer agrees that it will supply MGI with
documentation that will support all manufacturer claims and
representations. Further, Manufacturer will hold MGI
harmless for any actions, legal or otherwise, emanating from
claims and representations made by Manufacturer to MGI and
provided for in the documentation delivered to MGI
supporting said claims and representations. Manufacturer
further agrees that it will pay all costs, including court
costs and attorney s fees should any legal action arise that
would require MGI to protect itself and support the above
mentioned claims that MGI put forth on behalf of
Manufacturer in the normal course of business.
7. MUTUAL INDEMNIFICATION
Manufacturer shall indemnify and hold MGI free and harmless
from and against any and all claims, demands, loss or damage
in any way arising out of or based upon claims of Copyright
and/or trademark infringement with respect to any Product,;
or impure, adulterated, mislabeled, misbranded or defective
Products sold by Manufacturer prior to, during, or
subsequent to the term of this Agreement or any other claim
relating to the Product not directly caused by the
negligence of MGI; including, without limitation, reasonable
expenses and/or attorney s fees expended by Broker, in the
investigation or defense of any such claim.
2
<PAGE>
MGI shall indemnify and hold Manufacturer free and harmless
from and against any and all claims, demands, loss or damage
in any way arising out of, or based upon claims arising out
of the actions that MGI might have made relating to the sale
and/or distribution of products manufactured by WG.
Specially, claims that are made and are not authorized by
Manufacturer on Infomercial, radio broadcasts and other
advertising materials produced, but not approved by
Manufacturer.
8. COMPETITORS REPRESENTED
MGI agrees that while this contract is in full force and
effect, MGI will not offer for sale, distribution or
otherwise market a like product.
9. INDEPENDENT CONTRACTOR
MGI represents that it is an Independent Contractor and as
such is not under the direct control of the Manufacturer.
MGI agrees to pay for its own expenses and other related
expenses and costs in the daily nmning of its business; and,
unless expressly provided for in a separate agreement, such
as industry conferences and conventions, the Manufacturer
will not be made responsible for any of these expenses
unless provided fur in writing and signed by both parties.
10. NOTICE
Any notice required herein to be given in writing shall be
sent by regular or overnight mail or faxed to the other
party as follows:
If to Med Gen Inc.:
Med Gen Inc.
Attn: Paul S. Mitchell
2501 Davie Road, Suite 230
Davie, FL 33317
If to Wave Guard:
Wave Guard
c/o Reshet Inc.
584 Sanderling Court
Secaucus, NJ 07094
3
<PAGE>
11. COMPLIANCE WITH APPLICABLE LAW
The parties each agree that in performing their respective
obligations under this Agreement, they will comply with all
applicable federal, state and local statutes, rules and
regulations.
12. MISCELLANEOUS PROVISIONS
(a) Neither party to the agreement is an agent;
representative or employee of the other, but rather is
an independent business and all obligations of any kind
by either party are the sole obligations of the party
incurring the obligation.
(b) This Agreement shall be construed and interpreted in
accordance with and shall be governed by the laws of
the State of Florida, County of Broward.
(c) This Agreement is not assignable by either party.
(d) The terms of this Agreement can only be changed,
amended or modified in writing signed by duly
authorized individuals of both parties.
(e) MGI and Manufacturer agrees that this Agreement and any
applicable schedules will be the complete and exclusive
statement of the Agreement between the parties,
superseding all proposals or prior agreements, oral or
written, and all other communications between the
parties relating to the subject matter hereof.
(f) Both parties will initial each page of this Agreement,
including Schedule "A" and "B".
Wave Guard Med Gen Inc.
By: Reshet, Inc. By: Paul S. Mitchell
Title: Title: President
Signature: /s/ Signature: /s/Paul S. Mitchell
Date: 9/2/99 Date:
Witness: Witness:
4
<PAGE>
Exhibit A
---------
Territory
Electronic Media: Infomercials
-----------------
Exclusive Nationwide distribution rights. No exceptions.
5
<PAGE>
Exhibit B
---------
TERMS OF SALE
Price list
ITEM #: CG4OI
ITEM DESCRIPTION: Wave Guard Ear Piece and Antenna Absorber
PRICE: $6.00
FREIGHT: FOB Ewing, NJ
Allowances &
Ouantitv Discounts: NONE
MINIMUM ORDER: 100 cases
PAYMENT TERMS: 50% Prepayment with Order
6
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part III of this Form 10-SB and is qualified in its entirety by
reference to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 110,759
<ALLOWANCES> 5,000
<INVENTORY> 31,056
<CURRENT-ASSETS> 225,279
<PP&E> 35,982
<DEPRECIATION> 13,357
<TOTAL-ASSETS> 340,740
<CURRENT-LIABILITIES> 242,618
<BONDS> 0
0
0
<COMMON> 3,257
<OTHER-SE> 98,122
<TOTAL-LIABILITY-AND-EQUITY> 340,740
<SALES> 1,403,516
<TOTAL-REVENUES> 1,403,516
<CGS> 680,228
<TOTAL-COSTS> 777,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (60,070)
<INCOME-TAX> 116,000
<INCOME-CONTINUING> (176,070)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (176,070)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
