MDIN MedGen Inc (CE)

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB/A-1

(Mark One)

[X] AMENDED 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, 2008

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

for the transition period from ________________ to ______________

Commission File Number 000-29171

MED GEN, INC.

(Exact name of registrant as specified in its charter)

Nevada		65-0703559
(State of incorporation)		(IRS Employer Identification No.)

7280 W. Palmetto Park Road, Suite 306, 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 by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12B-2).

Yes [ ]

No [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ]

No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of June 30, 2008, 55,121,639  shares of common stock, .001 par value per share, were outstanding.

The Company's stock trades on the OTCBB under the symbol "MGEN".

Transitional Small Business Disclosure Format (check one):

Yes [ ]

No [X]

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INDEX

PART I

FINANCIAL INFORMATION

Item 1

Financial Statements

Balance Sheet - June 30, 2008 (Unaudited)

Statements of Operations - Three months ended June 30, 2007 and 2008 and Nine Months ended June 30, 2007 and 2008 (Unaudited)

Statements of Cash Flows - Nine months ended June 30, 2007 and 2008 (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

1

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MED GEN, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

2

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Med Gen, Inc.

Balance Sheet

June 30, 2008

(Unaudited)

ASSETS
Current Assets
Cash and cash equivalents	$	289,231
Accounts receivable, net of reserve of $15,196		13,054
Inventory		170,361
Other current assets		5,700
Total Current Assets		478,346
Property and Equipment, net		59,041
Other Assets
Deferred financing fees		59,777
Deposits and other		44,950
	$	642,114
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses	$	556,543
Accrued litigation judgment		53,311
Total Current Liabilities		609,854
Derivative financial instruments		709,700,296
Convertible debentures		6,309,334
Stockholders' (deficit)
Preferred stock, $.001 par value, 5,000,000 shares
authorized:
Series A 8% cumulative, convertible, 1,500,000 shares
authorized, 200,000 shares issued and outstanding		20,000
Undesignated, 3,500,000 shares authorized		-
Common stock, $.001 par value, 12,495,000,000
shares authorized, 56,294,340 shares
issued and outstanding		56,295
Paid in capital		30,094,446
Receivable for common stock		(2,588)
Accumulated (deficit)		(746,145,523)
		(715,977,370)
	$	642,114

See accompanying notes to the financial statements.

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Med Gen, Inc.

Statements of Operations

For the Three Months and Nine Months Ended June 30, 2008 and 2007

(Unaudited)

		Three Months		Nine Months
		2008		2007		2008		2007
Revenue
Product	$	60,335	$	39,170	$	151,661	$	116,899
Service		183,478		700,000		868,000		1,300,000
		243,813		739,170		1,019,661		1,416,899
Cost of sales		111,888		113,209		436,417		278,411
Gross profit		131,925		625,961		583,244		1,138,488
Operating expenses:
Non cash stock compensation -
selling, general and administrative		20,000		319,000		79,024		1,317,800
Selling, general and administrative expenses		415,139		721,321		1,757,008		1,738,648
		435,139		1,040,321		1,836,032		3,056,448
(Loss) from operations		(303,214)		(414,360)		(1,252,788)		(1,917,960)
Other (income) expense:
Interest expense		132,946		133,193		391,121		770,182
Derivative instruments		687,042,158		2,447,321		694,720,825		2,999,279
Interest income		(1,535)		(7,645)		(11,487)		(20,405)
		687,173,569		2,572,869		695,100,459		3,749,056
(Loss) before income taxes		(687,476,783)		(2,987,229)		(696,353,247)		(5,667,016)
Income taxes		-		-		-		-
Net (loss)	$	(687,476,783)	$	(2,987,229)	$	(696,353,247)	$	(5,667,016)
Per share information - basic and fully diluted:
Weighted average shares outstanding		34,612,226		2,657,932		20,321,783		1,935,093
Net (loss) per share	$	(19.86)	$	(1.12)	$	(34.27)	$	(2.93)

See accompanying notes to the financial statements.

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Med Gen, Inc.

Statements of Cash Flows

For the Nine Months Ended June 30, 2008 and 2007

(Unaudited)

		2008			2007
Cash flows from operating activities:
Net cash (used in) operating activities	$	(1,428,052)		$	(1,316,742)
Cash flows from investing  activities:
Purchase of property and equipment		(70,168)			(15,600)
Net cash (used in) investing activities		(70,168)			(15,600)
Cash flows from financing activities:
Proceeds from option exercise		27,442			-
Proceeds from convertible debentures		510,000			1,350,000
Net cash provided by financing activities		537,442			1,350,000
Net increase (decrease) in cash		(960,778)			17,658
Beginning - cash and cash equivalents		1,250,009			1,349,608
Ending - cash and cash equivalents	$	289,231		$	1,367,266

See accompanying notes to the financial statements.

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MED GEN, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2008

(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, 2007, 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)

Stockholders’ (Deficit)

Common Stock

During December 2007 the Company increased the number of authorized shares to 12,500,000,000 consisting of 12,495,000,000 shares of common stock and 5,000,000 shares of preferred stock. During June 2008 the Company effected a 1 for 200 reverse stock split. All share and per share amounts have been restated to reflect this split.

During the period from October 2007 through December 2007 the Company issued an aggregate of 5,422,175 shares of common stock for the conversion $133,199 of the notes described on Note 6.

During the period from January 2008 through March 2008 the Company issued an aggregate of 5,863,843 shares of common stock for the conversion $73,915 of the notes described on Note 6.

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During the period from April 2008 through June 2008 the Company issued an aggregate of 6,402,928 shares of common stock for the conversion $81,672 of the notes described on Note 6.

Through June 30, 2008, the Company issued 2,250,000 shares of common stock for services with a fair value of $45,000 which was charged to operations during the period.

During April 2008 the Company issued 2,000 shares of Series A preferred stock to officers with a fair value of $20,000 which was charged to operations during the period. Each share of Series A preferred stock is convertible into 1,000 shares of common stock.

During the period ended March 31, 2008, the Company repriced 100,000,000 options held by officers to $.0001 per share which resulted in a charge to operations of $14,024 during the period.

During June 2008 officers of the Company exercised 30,000,000 options for $30,000. The Company received proceeds of $27,442 and recorded a receivable for common stock of $2,588.

Stock Options

A summary of stock option activity is as follows:

	Number of shares	Weighted average Exercise price	Weighted Average fair value
Balance at September 30, 2007	100,000,000	$0.0001	$0.0001
Exercised	(30,000,000)
Balance at June 30, 2008	70,000,000

The following table summarizes information about fixed-price stock options at March 31, 2008:

				Exercisable
Exercise Prices	Weighted Average Number Outstanding	Outstanding Weighted Average Contractural Life	Weighted Average Exercise Price	Number Exercisable	Exercise Price
$0.0001	70,000,000	3.9 years	$0.0001	70,000,000	$0.0001

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(5)

Commitments, Concentrations and Contingencies

During the period ended March 31, 2008, the Company performed consulting services pursuant to contracts with 90 and 60 day terms for 9 companies for fees aggregating $868,000. Substantially all of the revenue related to these services was derived from clients of the Company’s primary lender NIR Group (See Note 6). These clients were referred to the Company either directly by NIR Group or by a third party.

Litigation

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 400,000 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, and charged $1,320,000 to operations for the settlement during the year ended September 30, 2004. The Company has agreed to file a registration statement covering an aggregate of 510,000 shares of common stock on or before January 15, 2005, and should it not due so an additional 25,000 shares of common stock would be due to Global. Global will be required to execute proxies giving the voting rights of the shares issuable to an officer of the Company.

A dispute between the parties arose and the settlement agreement was set aside by the Court and no new settlement agreement has yet been reached. Through September 30, 2005, the Company made payments to Global aggregating $75,000.  At September 30, 2005, the Company recorded an accrual amounting $2,426,191 (the original judgment of $2,501,191 less the payments made of $75,000) plus post judgment interest at 7% of $169,800. During the year ended September 30, 2005, the Company charged $1,181,191 to operations for the difference between the settlement recorded during 2004 and the total judgment awarded. The Company is currently attempting to negotiate a new settlement agreement with Global. In addition, the Company issued 400,000 shares of its common stock which were held by the Company pending issuance to Global. These shares were cancelled when the settlement was set aside.

During the year ended September 30, 2006, the Company recorded an additional $43,770 of post judgment interest.

During April 2006 the Company settled the litigation by agreeing to the following:

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A cash payment of $300,000

29 monthly payments of $31,667

The issuance of 75,000 common shares subject to registration rights

The holders of the shares shall have the right beginning on the effective date of the registration statement for a period of two years to require the Company at the Company’s discretion to sell the shares back to the Company for $200,000 or require the Company to issue additional shares so that the value of the shares held by the holders is $200,000. As of June 30, 2007, the Company issued an aggregate of 241,466 (including the 75,000 shares described above) shares of common stock in full settlement of the $200,000 obligation.

As a result of the settlement the Company’s obligation related to the litigation was reduced by $782,848 which has been recorded as a gain on the settlement date. The balance due is $53,311 at June 30, 2008.

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.

(6)      CALLABLE SECURED CONVERTIBLE NOTES AND DERIVATIVE INSTRUMENT LIABILITIES

Between March 30, 2005 and June 30, 2008, the Company entered into a series of fourteen Securities Purchase Agreements with four accredited investors ("Note Holders") for the sale of an aggregate of $8,111,263 of Callable Secured Convertible Notes (the "Convertible Notes") and warrants to purchase up to 416,200 shares of its common stock (the “Warrants”).

The first eight tranches of the Convertible Notes and tranche 13 bear interest at 8%, tranches nine through twelve bear interest at 6% and tranche 14 bears interest at 2%.  Tranche 14 was issued on January 31, 2008, to settle all accrued interest as of September 30, 2007.  All notes mature three years from the date of issuance.  The Company is not required to make any principal payments during the term of the Convertible Notes.  If the Convertible Notes are not in default, the Company has the right to prepay the Convertible Notes under certain circumstances at a premium ranging from 25% to 50% of the principal amount, depending on the timing of such prepayment.  The Company has granted the Note Holders a security interest in substantially all of the Company's assets.

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The Convertible Notes are convertible into shares of the Company's common stock at the Note Holders' option, at 45% of the average of the three lowest intra-day trading prices for the common stock as quoted on the Over-the-Counter Bulletin Board for the 20 trading days preceding the conversion date.  In connection with the issuance of tranche 13 and the waiver of registration penalties owing by the Company (see below) on January 28,2008, the Company agreed to reduce the conversion price from 50% to 45% (for tranches four through eight) and from 60% to 45% (for tranches nine through twelve) of the average market price (computed as described above).  At June 30, 2008, tranches one, two and three have been fully converted by the Note Holders and tranche four has been partially converted.

 

As of June 30, 2008, the average of the three lowest intra-day trading prices for the common stock as quoted on the Over-the-Counter Bulletin Board for the 20 preceding trading days was $0.0001, resulting in an effective conversion price for all tranches as of June 30, 2008 of $0.000045 per share.

The 416,200 warrants issued are exercisable for a period of five or seven years from the date of issuance and have exercise prices that range from $0.02 per share to $20.00 per share.  

The conversion price of the Convertible Notes and the exercise price of the warrants will be adjusted in the event that the Company issues common stock at a price below the initial fixed conversion or exercise price, with the exception of any shares of common stock issued in connection with the Convertible Notes. The conversion price of the Convertible Notes and the exercise price of the warrants may also be adjusted in certain circumstances such as if the Company pays a stock dividend, subdivides or combines outstanding shares of common stock into a greater or lesser number of shares, or takes such other actions as would otherwise result in dilution of the Note Holders' position.

Pursuant to Registration Rights Agreements entered into with the Note Holders, the Company is obligated to register for resale, within defined time periods, the shares underlying the Warrants and the shares issuable on conversion of the Convertible Notes. The terms of the Registration Rights Agreements provide that, in the event that the required registration statements are not filed or do not become effective within the required time periods, the Company is required to pay to the Note Holders as liquidated damages, an amount equal to 2% per month of the principal amount of the Convertible Notes. This amount may be paid in cash or, at the Holder’s option, in shares of common stock priced at the conversion price then in effect on the date of the payment.  The Company accrues any penalties incurred to date, together with an estimate of the penalties that may be incurred in the future, based on the Company’s expectation of when registration statements will be filed and/or effective and when the shares obtained can be freely sold without registration under Rule 144.  As of December 31, 2007, the Company had accrued $1,838,293 in respect of such penalties.  As discussed above, on January 28, 2008, the Note Holders agreed to waive all penalties

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incurred through that date in exchange for the Company agreeing to reduce the floating conversion price on tranches four through twelve of the Convertible Notes to 45% of the average trading price.  Also, effective February 15, 2008, the holding periods required under Rule 144 before securities may be freely sold without registration and without volume limitations were reduced.  As a result of the waiver and the amendments to the required holding periods under Rule 144, at June 30, 2008, the Company had accrued $84,756 in respect of estimated registration penalties.

Because the number of shares that may be required to be issued on conversion of the Convertible Notes is dependent on the price of the Company’s common stock and is therefore indeterminate, the embedded conversion option of the Convertible Notes and the Warrants are accounted for as derivative instrument liabilities (see below) in accordance with EITF Issue 00-19, "Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In, a Company's Own Common Stock" (EITF 00-19).  Accordingly, the initial fair values of the embedded conversion options and the Warrants were recorded as derivative instrument liabilities.  For option-based derivative instruments, the Company estimates fair value using the Black-Scholes valuation model, based on the market price of the common stock on the valuation date, an expected dividend yield of 0%, a risk-free interest rate based on constant maturity rates published by the U.S. Federal Reserve applicable to the remaining term of the instruments, and an expected life equal to the remaining term of the instruments.  Because of the limited historical trading period of our common stock, the expected volatility of our common stock over the remaining life of the conversion options and Warrants has been estimated at 50%.  The Company is required to re-measure the fair value of these derivative instrument liabilities at each reporting period.  

The full principal amount of the Convertible Notes is due upon the occurrence of an event of default, which include non-payment of principal and interest when due and failure to effect registration of the common shares underlying conversion of the Convertible Notes and exercise of the Warrants.  The Company previously obtained a waiver as of January 28, 2008 related to registration penalties incurred through that date and events of default as of that date.  However, at June 30, 2008, the Convertible Notes, which are carried at their face amount, are in default.  No demand for payment has been received, or is currently expected to be received, from the Note Holders.

Because the Notes are in default, the Note Holders may demand payment at an amount equal to the greater of:

(i)

130% times the Default Sum, where the Default Sum is the sum of: (a) the then outstanding principal amount of the Notes plus (b) accrued and unpaid interest on the unpaid principal amount of the Notes plus (c) default interest, if any, on the amounts due under (a) and/or (b) plus (d) any amounts owed to the Note Holders related to registration penalties or

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(ii)

the “parity value” of the Default Sum, where parity value means (a) the highest number of shares of common stock issuable upon conversion of the Default Sum, treating the trading day immediately preceding the payment date as the “conversion date” for purposes of determining the conversion price, multiplied by (b) the highest closing price for the common stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the payment date.

At June 30, 2008, the highest closing price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default was $0.04 and the conversion price of the Convertible Notes at that date was $0.000045 per share.  The default premium payable at June 30, 2008 reflects the amount payable if the Note Holders were to demand payment at that date.  

A summary of the Callable Secured Convertible Notes at June 30, 2008 is as follows:

Issue Date	Due Date		Face Amount		Principal Outstanding		Default  Premium Payable		Accrued Interest
03-30-2005	03-30-2008	$	740,000	$	0	$	0	$	0
05-25-2005	05-25-2008		700,000		0		0
08-23-2005	08-23-2008		100,000		0		0
08-26-2005	08-26-2008		500,000		238,071		27,428,125		21,502
10-31-2005	10-31-2008		600,000		600,000		67,207,474		36,033
02-23-2006	02-23-2009		600,000		600,000		67,207,474		36,033
04-21-2006	04-21-2009		750,000		750,000		84,009,342		45,041
08-10-2006	08-10-2009		1,500,000		1,500,000		168,018,686		90,082
01-30-2007	01-30-2010		350,000		350,000		38,649,103		15,764
02-09-2007	02-09-2010		350,000		350,000		38,649,103		15,764
06-21-2007	06-21-2010		650,000		650,000		71,776,906		29,277
09-30-2007	09-30-2010		350,000		350,000		40,202,403		15,764
01-28-2008	01-31-2011		525,000		525,000		61,380,663		17,836
01-31-2008	01-31-2011		396,263		396,263		45,171,017		3,300
		$	7,190,000	$	6,309,334	$	709,700,296	$	326,396

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At June 30, 2008, the following derivative liabilities related to common stock Warrants were outstanding:

Issue Date	Expiry Date	Number of Warrants		Exercise Price Per Share		Value – June 30, 2008
03-30-2005	03-30-2010	3,700		$17.00	$	-
05-25-2005	05-25-2010	3,500		$17.00		-
08-23-2005	08-23-2010	500		$18.00		-
08-26-2005	08-26-2010	2,500		$18.00		-
10-31-2005	10-31-2010	3,000		$20.00		-
02-23-2006	02-23-2011	3,000		$10.00		-
04-21-2006	04-21-2011	150,000		$10.00		-
08-10-2006	08-10-2013	75,000		$10.00		-
01-30-2007	01-30-2014	25,000		$2.00		-
02-09-2007	02-09-2014	25,000		$2.00		-
06-21-2007	06-21-2014	50,000		$1.80		-
09-30-2007	09-30-2014	25.000		$1.80		-
01-28-2008	01-28-2015	50,000		$0.02		-
		416,200			$	-

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(7)

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, 2008, the Company incurred a net loss of $696,353,247 and has a working capital deficit, an accumulated deficit and a stockholders’ deficit of $131,508, $746,145,523 and $715,977,370 at June 30, 2008.

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.

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.

(8)

Subsequent Events

Subsequent to June 30, 2008, the Company issued 30,000,000 shares of common stock pursuant to option exercises by officers and 2,345,402 shares of common stock pursuant to the conversion of the notes described in Note 6.

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Three months ended June 30, 2008, Compared with three months ended June 30, 2007, and Nine Months ended June 30, 2008, compared with Nine months ended June 30,2007.

GENERAL

The Company is now headquartered at 7280 W. Palmetto Park Rd., Suite 306, Boca Raton, Florida 33433 since December 1, 2007. The Company has elected to outsource the manufacturing of all its products at this time.

Results of Operations

For the quarter ended June 30, 2008, Sales decreased to $243,813 from $739,170. This decrease is directly attributable to the Company's financial consulting services division. In the 2007 quarter the Company provided $700,000 in consulting services as compared to $183,478 in 2008. For the Nine months ended June 30, 2007 sales decreased to $1,019,661 from $1,416,899. This decrease is directly attributable to the Company's financial consulting services division. In the 2007 quarter the Company provided $1,300,000 in consulting services as compared to $868,000 in 2008. Sales of the Company's products were up by approximately $35,000 on a comparative nine month basis. This increase was due to market advertising campaigns which directly increased the sales of Snorenz.

Gross profit for the third quarter was $131,925 versus $625,961 for the year ago quarter. The decrease was due to a substantial decrease in financial services billings.

For the nine months ended June 30, 2008, Gross profit was $583,244 versus $1,138,488 for the nine months ending June 30, 2007. The decrease was due to a substantial decrease in financial services billings.

Operating expenses (selling, general and administrative expenses) for the 2008 quarter decreased to $435,139 from $1,040,321. The decrease is due to several factors including, decreased legal fees, and consultants fees and a decrease in stock compensation from $721,321 to $20,000.

Operating expenses for the nine months decreased from $3,056,448 to $1,836,032. The decrease for the nine months is attributable to the Company's decreased non cash compensation of consultants and decreased legal expenses.

Other expenses increased form $2,572,869 to $687,173,569 for the comparable quarters and from $3,749,056 to $695,100,459 for the comparable year to date periods as a result of the change in the derivative liabilities including defaults on the convertible notes.

Net loss for the 2008 period was $687,476,783 as opposed to a loss of $2,987,229 in the prior year's quarter. The loss was substantially higher because of charges related to derivative instruments.

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Net loss for the Nine months was $696,353,247 as compared to $5,667,016 for the nine months a year ago. The loss was substantially higher because of charges related to derivative instruments.

For the third fiscal quarter the company reported a loss of $19.86 per share versus a loss of $1.12 per share in the year ago quarter.

For the third quarter nine month comparison the Company lost $34.27 a share as compared to a loss of $2.93 in the year ago quarter.

Liquidity and Capital Resources

Cash on hand at June 30, 2008 was $289,231 and the Company had working capital of $(131,508) at June 30, 2008.

 

Net cash used in operating activities was $1,428,052 during the nine months ended June 30, 2008.

Net cash used in investing activities was $70,168 during the nine months ended June 30, 2008.

Net cash provided by financing activities was $537,442 during the nine months ended June 30, 2008, which consisted of  borrowings under convertible debentures and proceeds from options exercises.

The Company has affected a 5% price increase for all of its products.

The Company has sufficient cash resources, receivables and cash flow to provide for all general corporate operations through the end of the fiscal year.

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. For the period ended June 30, 2008, the Company incurred a net loss of $696,353,247 and has an accumulated deficit of $746,145,523 at June 30, 2008.

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

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equity capital and to expand its revenue base may result in the Company depleting its available funds and not being able pay its obligations.

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.

Derivative Instruments

In connection with the sale of debt or equity instruments, we may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments,

such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

The identification of, and accounting for, derivative instruments is complex. Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For options, warrants and bifurcated conversion options that are accounted for as derivative instruments liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. That model requires assumptions related to the remaining term of the instruments

and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. We have estimated the future volatility of our common stock price based the history of our stock price. The identification of, and accounting for, derivative instruments and the assumptions used to value them can significantly affect our financial statements.

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, 2007 are those that depend most heavily on these judgments and estimates.

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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, 2007 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,

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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.

PART II

                         

Item 1.

LEGAL PROCEEDINGS

All legal proceedings disclosed in the prior filings have been settled

by the Company.

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

Not Applicable

Item 5.

OTHER INFORMATION

Not Applicable

Item 6.

EXHIBITS AND REPORTS ON FORM 8-K

The Company has filed Form 8-K on 4-18-2008 and 5-30-2008.

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

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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)

By: /s/ Paul B. Kravitz

Paul B. Kravitz

Chief Executive Officer

Date:  August 5, 2008

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