10QSB 1 june05-10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2005 ----------------- Commission file number 000-29171 MED GEN, INC. ----------------------------------------------------------------- [Exact name of small business issuer as specified in its charter] Nevada 65-0703559 ------------------------ ------------------------- (State of incorporation) (IRS Employer Identification No.) 7284 W. Palmetto Park Road, Suite 207, Boca Raton, FL 33433 ----------------------------------------------------------- (Address of principal executive offices) (561) 750-1100 --------------------------- (Issuer's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, Par Value $.001 per share 31,136,447 Shares outstanding as of June 30, 2005. The Company's stock trades on the OTCBB under the symbol "MDGN". Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] INDEX ----- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet - June 30, 2005 (Unaudited) Statements of Operations - Three months ended June 30, 2005 and 2004 (Unaudited) and Nine Months ended June 30, 2005 and 2004 Statements of Cash Flows - Nine months ended June 30, 2005 and 2004 (Unaudited). Notes to Financial Statements (Unaudited). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3. Controls and Procedures PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 2 MED GEN, INC. PART I - FINANCIAL INFORMATION Item 1. Financial Statements 3 Med Gen, Inc. Balance Sheet June 30, 2005 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 514,805 Accounts receivable 82,209 Inventory 140,846 Other current assets 5,700 ------------ Total Current Assets 743,560 ------------ Property and Equipment, net 33,595 ------------ Other Assets Deferred loan costs 164,671 Deposits and other 37,950 ------------ 202,621 ------------ $ 979,776 ============ LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current Liabilities Accounts payable and accrued expenses $ 61,837 ------------ Total Current Liabilities 61,837 ------------ Convertible debentures 1,440,000 ------------ Stockholders' (Deficit) Preferred stock, $.001 par value, 5,000,000 shares authorized Series A 8% cumulative, convertible, 1,500,000 shares authorized - Undesignated, 3,500,000 shares authorized - Common stock, $.001 par value, 245,000,000 shares authorized, 31,136,447 shares issued and outstanding 31,136 Paid in capital 15,098,308 Receivable for common stock (35,000) Deferred compensation (19,024) Accumulated (deficit) (15,597,481) ------------ (522,061) ------------ $ 979,776 ============ See accompanying notes to financial statements. 4
Med Gen, Inc. Statements of Operations For the Three Months and Nine Months Ended June 30, 2004 and 2005 (Unaudited) Three Months Nine Months ------------------------------------------------------------- 2004 2005 2004 2005 ------------- ------------- ------------- ------------- Net sales $ 232,087 $ 181,034 $ 744,288 $ 664,678 Cost of sales 98,460 99,658 346,649 270,747 ------------- ------------- ------------- ------------- Gross profit 133,627 81,376 397,639 393,931 ------------- ------------- ------------- ------------- Operating expenses: Non cash stock compensation - selling, general and administrative 279,350 60,000 415,100 365,640 Selling, general and administrative expenses 1,062,432 557,582 1,873,503 1,184,738 ------------- ------------- ------------- ------------- 1,341,782 617,582 2,288,603 1,550,378 ------------- ------------- ------------- ------------- (Loss) from operations (1,208,155) (536,206) (1,890,964) (1,156,447) ------------- ------------- ------------- ------------- Other (income) expense: Interest expense 39,850 47,111 111,185 56,171 Non cash stock interest expense 37,500 - 50,000 180,000 ------------- ------------- ------------- ------------- 77,350 47,111 161,185 236,171 ------------- ------------- ------------- ------------- (Loss) before income taxes (1,285,505) (583,317) (2,052,149) (1,392,618) Income taxes - - - - ------------- ------------- ------------- ------------- Net (loss) $ (1,285,505) $ (583,317) $ (2,052,149) $ (1,392,618) ============= ============= ============= ============= Per share information - basic and fully diluted: Weighted average shares outstanding 15,328,609 30,806,777 8,098,809 29,065,385 ============= ============= ============= ============= Net (loss) per share $ (0.08) $ (0.02) $ (0.25) $ (0.05) ============= ============= ============= =============
See accompanying notes to financial statements. 5
Med Gen, Inc. Statements of Cash Flows For the Nine Months Ended June 30, 2004 and 2005 (Unaudited) 2004 2005 ------------- ------------ Cash flows from operating activities: Net cash (used in) operating activities $ (1,460,329) $ (963,390) ------------- ------------ Cash flows from investing activities: Net cash (used in) investing activities - - ------------- ------------ Cash flows from financing activities: Borrowing (repayment) of related party notes (994,315) (175,000) Proceeds from option exercise 1,059,173 101,987 Proceeds From convertible debentures 1,915,139 1,337,500 ------------- ------------ Net cash provided by financing activities 1,979,997 1,264,487 ------------- ------------ Net increase in cash 519,668 301,097 Beginning - cash and cash equivalents 90,791 213,708 ------------- ------------ Ending - cash and cash equivalents $ 610,459 $ 514,805 ============= ============
See accompanying notes to financial statements. 6 MED GEN, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 (UNAUDITED) (1) Basis Of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and Item 310(b) of Regulation S-B. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements of the Company as of September 30, 2004, and for the two years then ended, including notes thereto included in the Company's Form 10-KSB. (2) Earnings Per Share The Company calculates net income (loss) per share as required by Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods when anti-dilutive commons stock equivalents are not considered in the computation. (3) Inventory Inventory is stated at the lower of cost, determined on a first in, first out basis, or market value. Inventory consists principally of finished goods and packaging materials. (4) Notes Payable - Related Parties During the period ended March 31, 2005, the Company repaid $181,000 in notes due to related parties and borrowed an additional $411,000 from related parties with interest at 8% per annum. The balance due was $405,000 at March 31, 2005. During April 2005 the Company repaid the $405,000 balance (see Note 8). (5) Income Taxes The Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes", which requires use of the liability method. SFAS 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled, or realized. The Company's deferred tax asset of approximately $2,300,000 resulting from net operating loss carryforwards aggregating 7 approximately $6,700,000 is fully offset by a valuation allowance. The Company has recorded a valuation allowance to state its deferred tax assets at estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income. The provision for income taxes differs from the amount computed by applying the statutory rate of 34% to income before income taxes due to the effect of the net operating loss. The principal difference between the accumulated deficit for income tax purposes and for financial reporting purposes results from non- cash stock compensation being charged to operations for financial reporting purposes. (6) Stockholders' (Deficit) During October 2004 the Company issued 2,000,000 shares of common stock to an officer pursuant to the exercise of options granted in October 2004 at $.10 per share. The fair value of the shares issued was $.16 per share. The difference between the fair value and the exercise price of $120,000 has been charged to operations during the period ended December 31, 2004. In addition, the Company recorded a receivable for common stock of $200,000 for the amount due for the shares. During the quarter ended March 31, 2005, the Company reduced the amount receivable for these shares to the current market price of its Common stock. This reduction resulted in a charge to operations of $117,640 during the quarter ended March 31, 2005. This officer remitted an aggregate of $101,987 to the Company related to the receivable for common stock during the period from October 1, 2004, through June 30. At June 30, 2005, $35,000 remained receivable for common stock. During January through March 2005, the Company issued 2,000,000 shares of common stock to a related party lender described in Note 4, for future loans to be made to the Company pursuant to a line of credit. The fair value of these shares of $180,000 was to be charged to operations as additional interest over the term of the line of credit. The Company recorded a charge to operations for the value of the shares as the line of credit was terminated at March 31, 2005, and the balance of $405,000 was repaid in April 2005. In addition, the Company issued 200,000 shares of common stock to a consultant and 1,000,000 shares to a related party described in Note 4 for services. The fair value of these shares of $68,000 was charged to operations. During January 2005 the Company filed a Form SB-2 registration statement covering the 8,000,000 common shares described in Note 7 and 2,200,000 of the common shares described above. The registration statement was amended through June 2005 to include an aggregate of 206,428,758 common shares including the shares isuable pursuant to the conversion of the convertible debentures and exercise of warrants issued as described in Note 8. During April 2005 the Company increased its authorized shares to 250,000,000 of which 5,000,000 are preferred shares and 245,000,000 are common shares. During May 2005 the Company issued 1,000,000 shares of common stock to an affiliate for consulting services and charged the fair value of the shares of $60,000 to operations. Stock-based Compensation During October 2004 the Company issued 2,000,000 options to purchase shares of common stock to an officer. Compensation costs charged to operations aggregated $120,000 for these options. SFAS 123 requires the Company to provide proforma information regarding net income and earnings per share as if compensation cost for the Company's stock option plans had been determined in 8 accordance with the fair value based method prescribed in SFAS 123. The fair value of the option grants is estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants during the period ended June 30, 2005: expected life of options of 5 years, expected volatility of 121%, risk-free interest rate of 3% and no dividend yield. The weighted average fair value at the date of grant for options granted during the period ended June 30, 2005, approximated $.14 per option. These results may not be representative of those to be expected in future years. Under the provisions of SFAS 123, the Company's net income (loss) and earnings (loss) per share would have been reduced (increased) to the proforma amounts indicated below: Net (loss) As reported $(1,392,618) Proforma $(1,552,618) Basic and diluted (loss) per share As reported $(.05) Proforma $(.05) A summary of stock option activity is as follows:
Weighted Weighted Number average average of exercise fair shares price value ------ ----- ----- Balance at September 30, 2004 934,112 Granted 2,000,000 $1.23 $1.23 Exercised/Forfeited (2,750,260) $1.23 $1.23 ---------- Balance at June 30, 2005 183,852 ==========
The following table summarizes information about fixed-price stock options at June 30, 2005:
Outstanding Exercisable Weighted Weighted Weighted- Average Average Average Exercise Number Contractual Exercise Number Exercise Prices Outstanding Life Price Exercisable Price ------ ----------- ---- ----- ----------- ----- $1.01 31,852 2.0 years $1.01 31,852 $1.01 $1.25 100,000 5.0 years $1.25 100,000 $1.25 $1.31 52,000 5.0 years $1.31 52,000 $1.31 ------- ------- 183,852 183,852 ======= =======
(7) Commitments, Concentrations and Contingencies During the period ended June 30, 2005, the Company derived 46%, 15% and 10% of its total sales from three customers. At June 30, 2005, $49,946 is due from these customers. 9 During May 2003 Global Healthcare Laboratories, Inc. (Global) made a claim against the Company for breach of contract under a master license agreement. Management contended that Global committed fraud and multiple breaches of the master license agreement and that the claim was without merit. The matter was re- filed for the third time by the plaintiffs after two prior dismissals by the Federal courts for failure to state a cause of action. On August 31, 2004, a verdict was rendered in favor of the plaintiffs and they were awarded a judgment in the sum of $2,501,191. The Company initially intended to appeal the verdict, however on December 3, 2004, the Company and Global settled the matter as follows: The Company would make cash payments to Global aggregating $200,000 through March 1, 2005, and would issue to Global an aggregate of 8,000,000 shares of common stock. The shares to be issued were valued at their fair market value of $1,120,000. The Company has recorded an accrual of $200,000 for the cash payments due and a stock subscription of $1,120,000 for the common shares issuable at September 30, 2004. The Company has agreed to file a registration statement covering an aggregate of 10,200,000 shares of common stock on or before January 15, 2005, and should it not due so an additional 500,000 shares of common stock would have been due to Global. The Company believes that it has complied with the filing requirement. Global will be required to execute proxies giving the voting rights of the shares issuable to an officer of the Company. The Company made payments aggregating $200,000 to Global. During the periods covered by these financial statements the Company issued shares of common stock and subordinated debentures without registration under the Securities Act of 1933. Although the Company believes that the sales did not involve a public offering of its securities and that the Company did comply with the "safe harbor" exemptions from registration, if such exemptions were found not to apply, this could have a material impact on the Company's financial position and results of operations. In addition, the Company issued shares of common stock pursuant to Form S-8 registration statements and pursuant to Regulation S. The Company believes that it complied with the requirements of Form S-8 and Regulation S in regard to these issuances, however if it were determined that the Company did not comply with these provisions this could have a material impact on the Company's financial position and results of operations. During January 2005 and effective February 16, 2005, the Company entered into a professional services agreement with an entity acting as an independent contractor to distribute its products in the United States. As compensation the Company agreed to pay a commission of the greater of 5% of invoiced shipments or $105,000 for the year ended December 31, 2005 and $144,000 for each of the years ended December 31, 2006 and 2007. The agreement may be terminated by either party for any reason within 6 months of the date of the agreement. Thereafter the Company may terminate the agreement with 6 months notice. During January 2005 the Company entered into a one year consulting agreement with an entity to assist the Company with its business plan and introduce the Company to potential investors. Should the Company decide to enter into a funding transaction as a result of an introduction by the consultant the consultant shall designate a registered broker Dealer to complete the transaction. The consultant shall receive a cash fee of 10% of the funds procured and warrants to purchase common stock equal to 10% of the total shares issued for a period of 5 years at 105% of the price at which the shares are sold. The shares underlying the warrants are subject to certain registration rights. (8) Notes Payable On March 31, 2005, the Company executed an agreement with NIR Group, a New York-based investor group. The basic terms of the agreement were as follows: 10 A. 1,540,000 8% Callable Secured Convertible Debenture due three years from the date of issuance. The investment will be made in three tranches, the first in the amount of $740,000 upon signing of the agreement; the second in the amount of $400,000 upon the filing of a registration statement; and the third in the amount of $400,000 upon the effectiveness of the registration statement. The first payment in the amount of $740,000 less fees associated with the debenture of $75,000 and additional payments of $700,000 less fees associated with the debenture of $27,500 have been received by the Company. The $102,500 in fees will be charged to operations over the term of the debenture. The balance of the funds was utilized to pay off the existing Secured Lender in the sum of $405,000 plus accrued interest and the remaining amount will be used for an advertising campaign and general corporate obligations. An officer also agreed to pledge his common stock during the period that the note is outstanding. B. Interest at the rate of 8% per annum payable quarterly with 8 months payable in a lump sum at the close of the second tranche and 8 months payable in a lump sum at the close of the third tranche. The interest rate resets to 0% for any month in which the price of the stock is 125% of the Initial Market Price (approximately $.05) for each trading day during that month. C. The Debenture is immediately convertible into shares of common stock at any time during the term. The conversion price will be equal to 40% of the lesser of $.09 and the average of the lowest intra-day trading prices during the 20 trading days immediately prior to the conversion. D. At the Company's option, in any month in which the current stock price is below the Initial Market Price, the Company can pay outstanding principal and interest due for that month and no conversions can be made for that month. E. The holder of the Debenture will also receive 1,540,000 warrants to purchase one share of common stock at an exercise price of $.085. The fair value of $.05 per warrant will be charged to operations as interest expense over the term of the Debenture. Through June 2005 the Company has recorded $72,000 related to the value of the warrants as deferred loan costs and amortization of $9,829 as additional interest on the debentures. F. The Company will undertake to file a Registration Statement covering all of the underlying common stock issuable under the Debenture and the Warrants (see Note 6). (9) Basis of Reporting The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced a significant loss from operations including the settlement of certain litigation. For the period ended June 30, 2005, the Company incurred a net loss of $1,392,618 and has an accumulated deficit of $15,597,481 at June 30, 2005. The Company's ability to continue as a going concern is contingent upon its ability to secure additional financing, increase ownership equity and attain profitable operations. In addition, the Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which the Company operates. The Company is pursuing financing for its operations and seeking additional investments. In addition, the Company is seeking to expand its revenue base by adding new customers and increasing its advertising. Failure to secure such financing or to raise additional equity capital and to expand its revenue base may result in the Company depleting its available funds and not being able pay its obligations. 11 The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------- Three months ended June 30, 2005 Compared with three months ended June 30, 2004 and Nine Months ended June 30,2005 compared with Nine months ended June 30,2004 -------------------------------------------------- GENERAL ------- The Company is now headquartered at 7284 W. Palmetto Park Rd., Suite 207, Boca Raton, Florida 33433 since January 1,2004. It does not foresee any need to further expand its 2200 sq. ft. corporate facility. The Company has elected to outsource the manufacturing of all its products at this time. Results of Operations --------------------- For the 2004 third fiscal quarter ended June 30, 2005, Sales decreased 22.0% to $181,034 from $232,087. This decrease was primarily caused by Eckerd's drugstores merger with CVS. CVS ceased ordering Snorenz at the end of December 2004. The Company has attempted to re-open this account by presenting the product to the category buyer and the decision by CVS is still pending. The Company is hopeful that a positive decision for its product lines will occur by October 1, 2005. Also affecting Sales were the overall consumer demand for the products in this category "Cough and Cold" which showed a sharp decline. This overall category decline has resulted in Walgreen's no longer carrying the product lines as well. For the Nine months ended June 30, 2005 sales decreased 11.70% to $664,678 from $744,288, for the nine months ending June 30, 2004. The decrease is attributable to a decline in overall customer demand and the loss of several accounts as described above. Gross profit for the third quarter was $81,376 versus $133,627 for the year ago quarter, a decrease of 39.1%. The decrease was due to lower sales. The gross profit margin was 45.0% during the quarter ended June 30, 2005, as compared to 57.6% during the quarter ended June 30, 2004. This decrease resulted from lower sales as cost of sales on a quarter comparison where virtually unchanged. For the nine months ended June 30, 2005 Gross profit was $393,931 versus $397,639 for the nine months ending June 30, 2004, a decrease of 0.9%. The gross profit margin was 59.3% during the quarter ended June 30, 2005, as compared to 53.4% during the quarter ended June 30, 2004. This increase resulted from increased wholesale prices and the shipping of previously manufactured inventory. 13 Operating expenses (selling, general and administrative expenses)for the 2005 quarter decreased to $557,582 from $1,062,432, a decrease of 47.5%. The large decrease is due to several factors including, decreased legal fees, consultants fees and overall operating costs. Operating expenses for the nine months decreased from $1,873,503 to $1,184,738, a decrease of 36.8%. The decrease for the nine months is attributable to the Company's continued cost cutting program; also, the Company has bought remnant advertising time and saved significant amounts in order to effectively advertise the products on a reduced operating budget. The Company is also waiting until the Fall of 2005 to advertise the products in conjunction with new accounts ordering and placing the products on the shelves. Operating loss for the 2005 period was $536,206 as opposed to a loss of $1,208,155 in the prior year's quarter. The loss was substantially lower because of lower SGA and cost cutting measures by management. Operating loss for the Nine months was $1,156,447 as compared to $1,890,964 for the nine months a year ago. The loss was substantially lower because of lower SGA and cost cutting measures by management. Interest expense increased from $39,850 in the year ago quarter to $47,111 for this quarter. Interest expense for the nine month period decreased from $111,185 to $56,171. The decrease is directly attributable to less borrowings by the Company. For the second fiscal quarter the company reported a loss of $0.02 per share versus a loss of $0.08 per share in the year ago quarter. For the third quarter nine month comparison the Company lost $0.05 cents as compared to a loss of $0.25 in the year ago quarter. Liquidity and Capital Resources ------------------------------- Cash on hand at June 30, 2005 was $514,805 and the Company had working capital of $681,723 at June 30, 2005. Net cash used in operating activities was $963,390 during the nine months ended June 30, 2005. Net cash used in investing activities was $-0- during the nine months ended June 30, 2005. 14 Net cash provided by financing activities was $1,264,487 during the nine months ended June 30, 2005, which consisted of $101,987 from the proceeds from the sale of management options and $175,000 of repayment of the original credit facility and $1,337,500 from the convertible debenture. The Company has affected a 5% price increase for all of its products. The Company has also eliminated one-time burdens of legal, computer and other non-recurring expenses. The Company has sufficient cash resources, receivables and cash flow to provide for all general corporate operations in the foreseeable future. CRITICAL ACCOUNTING POLICIES ---------------------------- Our discussion of results of operations and financial condition relies on our consolidated financial statements that are prepared based on certain critical accounting policies that require management to make judgments and estimates that are subject to varying degrees of uncertainty. We believe that investors need to be aware of these policies and how they impact our financial reporting to gain a more complete understanding of our financial statements as a whole, as well as our related discussion and analysis presented herein. While we believe that these accounting policies are grounded on sound measurement criteria, actual future events can and often do result in outcomes that can be materially different from these estimates or forecasts. The accounting policies and related risks described in the notes to our financial statements for the year ended September 30, 2004 are those that depend most heavily on these judgments and estimates. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS ----------------------------------------- Recently issued accounting pronouncements and their effect on us are discussed in the notes to the financial statements in our September 30, 2004 audited financial statements. FORWARD LOOKING STATEMENTS -------------------------- When used throughout in this form 10QSB filing, the words "believe", "should", "would", and similar expressions that 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 suppliers or its strategic business partners. In addition to factors that may be described in the Company's other Securities and Exchange Commission ("SEC") filings, unforeseen circumstances or events 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 10QSB filing. Item 3. Controls & Procedures As required by Rule 13a-15 under the Exchange Act, as of the date of the filing of this report , the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President, Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, the Company's President, Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Acts reports is recorded, processed and summarized and is reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure control procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 15 PART II ------- Item 1. LEGAL PROCEEDINGS All legal proceedings disclosed in the prior filings have been settled by the Company. The terms of the settlement were disclosed on From 8-K as filed on December 12, 2004. Item 2. CHANGE IN SECURITIES Not Applicable. Item 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 21st, 2005 the Company filed its Definitive Proxy Statement requesting an increase of the authorized shares from 50,000,000 to 250,000,000. The results of the proxy vote which was scheduled for May 22, 2005 were extended to June 22nd, 2005. The results were that the amendment passed by a majority vote of the shareholders Item 5. OTHER INFORMATION Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ------------------------------------------------------------------- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Med Gen, Inc. (Registrant) Date: July 27, 2005 By: /s/Paul B. Kravitz -------------------------- Paul B. Kravitz Chief Executive Officer 16