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MDHI News

Medical Alarm Concepts Publishers Shareholder Letter

2012-09-17 09:56 ET - News Release

KING OF PRUSSIA, Pa., Sept. 17, 2012 /PRNewswire/ -- Medical Alarm Concepts Holding, Inc. (OTCQB: MDHI.PK), manufacturer of the MediPendant™ two-way voice personal medical alarm, sent the following letter to all shareholders outlining recent accomplishments and future plans.

Dear Shareholders of Medical Alarm Concepts Holding, Inc.:

It's been a very long road for Medical Alarm Concepts Holding, Inc. (MDHI) since going public several years ago. The Company was organized with the idea of revolutionizing the personal medical alarm sector through the introduction of a unique two-way, speak and listen through the medical pendant technology. For much of our history the company has failed to realize its growth potential. These reasons include a lack of adequate initial capital to execute a truly robust marketing plan, and structural balance sheet issues relating to our initial money raise that resulted in a toxic structure of our convertible debt, which in turn handicapped our ability to raise additional funds needed to make the company a success.

I am writing to you today to explain what we have done to rectify these issues and to let you know about the dramatic turnaround our business has realized over the past few months. What we plan to express in this shareholder letter is not that we are planning to turn our business around, but rather that we have already turned the business around and that we are experiencing extremely strong sales growth rates. Additionally, we wish to express to you that we are very quickly approaching our revenue breakeven point. This turnaround has been very dramatic and as we move into our busiest sales period of the year, our confidence level has never been higher.

Here's a summary of what's happening at the company:

Debt Restructuring - Over the past 12 months, we have worked closely with our convertible debt holders in order to negotiate an adequate settlement that returned the debt holder's capital with a profit, while still maintaining the integrity of our capital structure. We are very happy to report to our shareholders this process is now complete with all of the debt now consolidated under a single entity that has a significant interest in the long-term viability of the company. As a result of these negotiations a large portion of the convertible debt has now been outright cancelled, 165 million highly dilutive warrants have been cancelled, and as we announced last week, all of the Series A and Series B Convertible Preferred stock has been retired. We strongly believe that for the first time in the company's history there is now a workable capital structure that will allow us to realize the growth potential we initially envisioned.

Credit Line Establishment and Balance Sheet Restructuring - We have been able to inject new funds into the company in a manner that very few small entrepreneurial organizations are able to achieve. We have established an unsecured $750,000 credit line with no features for conversion to either common or preferred stock. It is the type of financing that only much larger companies are able to establish and it has made a huge difference in our ability to maneuver within our market space. With the funds from this credit line we have paid off nearly all of our trade payables, significantly increased our inventory levels, and implemented many of the marketing programs that had been planned but never funded.

Retail and International Presence - Last December we announced the MediPendant would be offered on the E-Commerce platform of one of the largest retailers in the country. This relationship has progressed throughout 2012 and both parties are very happy with the progress achieved. The company also recently announced the initiation of shipments to our first European customer and that we are in negotiations for several other international contracts. These new relationships have not only resulted in significant revenue growth, but have also attracted additional attention and market focus to our unique product offering.

Significant Order Growth - We are very happy to report to our shareholders that the above outlined actions and programs are resulting in very strong growth in orders and revenues. We believe an important aspect of this growth has been the recent implementation of a much more aggressive pay per click Internet campaign, which has thus far yielded strong website clicks and order follow through. Also, we feel the medical alarm market is now beginning to recognize the brand "MediPendant" and this is leading to more inquiries and resulting order flow.

Returning to Fully Reporting SEC Status - Medical Alarm Concepts is a voluntary reporting organization with the Securities & Exchange Commission and thus we are not required to file financials. Transparency is, nevertheless important to us, so we are committed to filing full financials with the SEC as soon as we are able. As we announced in a recent press release, we have informed our accountants to begin preparing the financials in order to return us to fully reporting status. As many of you know, maintaining full reporting is very expensive for small companies and thus late last year, we made the strategic decision to suspend this reporting in order to remain solvent and to continue to implement programs to restore growth. We are very happy to tell our investors we believe this was the right strategy and we believe the growth we are currently experiencing is the result.

Breakeven Mark - It is important to remember that we not only receive revenues for sales of MediPendant personal medical alarm equipment, but also monthly subscription services for the monitoring of these alarms. As we continue to accelerate sales, our recurring monthly revenues continue to grow and we are now quickly reaching the point where these recurring revenues are very close to surpassing our monthly fixed expenses. The exact timing of the company reaching its breakeven point depends on the sustainability of the current growth rate trend, but based on these recent trends we expect to reach profitability by the end of the year. With that said, however, we believe the remaining portion of 2012 represents our busiest period of growth and as a result, we would not be surprised to see a significant up-tick in monthly service contracts during this period. Should this transpire, we could easily reach profitability sooner. Profitability of the company is virtually inevitable considering the dynamics of the recurring monthly revenue model and our current growth trajectories.

Capital Structure - There are currently approximately 631,000,000 outstanding common shares, and as we indicated above, the entire convertible preferred stock has now been retired as have the vast majority of outstanding warrants. Based on the recent closing price of the common shares, our total market capitalization is only approximately $2.5 – $3 million. While we have suffered dilution as a result of the conversions and settlements with convertible debt holders, we have been able to hold this dilution to a minimum, and this will hopefully allow existing shareholders to capitalize on our fast trajectory to profitability.

Summary - The past few years have been very difficult for Medical Alarm Concepts and its shareholders, but we believe the near-term and long-term future lookouts are extremely bright. We are happy to let you know today that a significant turnaround in our operation has taken place, that we are experiencing a very strong growth trend, and a rapid drive toward profitability. As we move in to what we believe will be the busiest growth period of the year, we believe the very real possibility exists for further acceleration of our growth rate. When we become fully reporting, which we estimate will be approximately the end of this calendar year, we believe investors will see us emerge with a clean balance sheet, a sound capital structure free of any toxic debt or warrants, positive working capital, strong gross margins and positive earnings-per-share.

Considering what we believe to be an extremely low total market capitalization of only $2.5 - $3 million, we believe all shareholders are well-positioned for additional value creation over the coming weeks and months.

We have never been more excited about the direction of our business and we thank you for your support.

Sincerely,

Ronald Adams

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