LAW OFFICE
OF
STEWART A. MERKIN
ATTORNEY AT LAW
RIVERGATE PLAZA, SUITE 300
444 BRICKELL AVENUE
MIAMI, FLORIDA 33131
www.merkinlaw.net
e-mail: merkin@merkinlaw.net
Tel.: (305) 357-5556 Fax: (305) 358-2490
May 23, 2005
Jeffrey P. Riedler, Assistant Director
Division of Corporate Finance
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Mail Stop 0309
Washington, D.C. 20549
Re: Med Gen, Inc.
Form SB-2 Registration Statement (the "Prospectus")
File No. 333-122093
Form 10-KSB for the fiscal year ended September 30, 2004
Form 10-QSB for the period ended December 31, 2004
File No. 0-29171
Dear Mr. Riedler,
This office represents Med Gen, Inc.
This letter is in response to your letter dated April 22, 2005. The
numbers in my responses correspond with the numbers in your letter.
Please also note the modifications made to the registration statement
because of the recent financing arrangements entered into by us.
1. Please refer to the modifications contained on the prospectus
cover page and the section entitled "Historical Price Data of our
Common Stock".
2. Please refer to the modification contained on the prospectus cover
page.
3. Please refer to the modifications contained in this risk factor.
4. Please refer to the modifications contained in this risk factor.
5. Please refer to the modifications contained in this risk factor.
6. Please refer to the modification contained in this risk factor.
7. Please refer to the modification contained in this risk factor.
8. On February 16, 2005, the Company entered into employment
agreements with Messrs. Kravitz and Mitchell. Please refer to the
modifications regarding these agreements contained in this risk
factor,in the section entitled "Employment Agreements" on page 17.
Copies of the employment agreements are attached as exhibits to the
registration statement. (Alan, since we are going to attach these,
clean them up for spacing etc. and change Delaware to Nevada.
9. Please refer to the revised chart brought current through April
30, 2005.
10. Please refer to the supporting documents attached to this letter.
11. Please refer to the modification contained in the section
entitled "Internet Sales" on page 14.
12. There was no connection between the drop in our sales and the
termination of the distribution agreement that was the subject of the
litigation (total sales from the distribution agreement was only
$19,000). The drop in our sales was due to the change in our marketing
from television infomercials to sales through retail outlets.
13. Please see the revised compensation table.
14. Please see the table for the option/stock appreciation rights
granted in last fiscal year and the the Aggregated Option Exercise
Table in the "Executive Compensation" section.
15. The only indebtedness to us by Mr. Kravitz is for 700,000 shares
exercised at $.05 per share for a total of $35,000 and is noted in the
Form 10QSB filed on May 9, 2005.
16. After certain of the options were exercised, because of the drop
of the price of our stock, Our Board of Directors authorized the
reduction of the exercise price at meetings on October 7, the 2003 for
10,270,000 shares and on March 9, 2005 for 2,000,000 shares.
17. All of the shares underlying the options granted to Mr. Kravitz
were registered on Forms S-8 filed on April 22, 2002 and July 10,
2002.
18. The only indebtedness to us by Mr. Kravitz is for 700,000 shares
exercised at $.05 per share for a total of $35,000 and is noted in the
Form 10QSB filed on May 9, 2005.
19. January 15, 2005, was a Saturday and January 17, 2005 was Martin
Luther King Day, a national holiday. Therefore, filing the
registration statement on January 18 was in compliance with the
agreement with the plaintiffs and did not require the issuance of any
additional shares.
20. FIN 39, Paragraph 5 states that a right of setoff exists when
all of the following conditions are met:
a. Each of the parties owes the other determinable amounts
b. The reporting party has the right to set off the amount owed
with the amount owed by the other party
c. The reporting party intends to set off
d. The right of setoff is enforceable by law
It should be noted that we are not exercising a right of setoff. The
customers, which consist of significant retailers, inform us that they
have run or will run an advertising campaign and will obtain payment
by reducing the amount payable to us on our receivable from the
customer. In conjunction therewith, they reduce the payment to us by
the charge for the advertising.
21. Please see the revisions made to the financial statements.
22. Please see the revisions made to the financial statements.
23. Our legal, rental and computer expenses for fiscal years 2002,
2003 and 2004 were as follows:
2002 2003 2004
Legal Fees $318,596.60 $ 63,790.42 $221,842.45
Rent 342,918.22 228,901.39 159,085.97
Computer Exp. 30,613.51 15,026.59 9,245.93
Legal Fees: In 2002, most of our legal fees were the result of the
Global Healthcare lawsuit and all of the related discovery costs. In
2003, our legal fees in connection with the lawsuit dropped
significantly because the case was on the calendar awaiting trial. In
2004, we retained new attorneys and an expert witness for the case
which contributed to the increased legal fees. So far, our legal fees
for 2005 are approximately $67,000 for legal fees in connection with
the filing of this SB-2 and raising capital.
Rent Expenses: In 2002 and 2003, we had several warehouses with long
term leases which we renegotiated which resulted in lower rental
expenses. At the beginning of 2004, we moved our headquarters to a
smaller office which resulted lower rental expenses.
Computer Expenses: In 2002, most of our computer expenses were for
upgrading our system to handle EDI data from our vendors which has
resulted in lower overall computer costs.
Very truly yours,
/S/Stewart A. Merkin
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SAM:ecq
cc: Med Gen, Inc.