Introduction 

GelStat Corporation (“GelStat” or “Company”) is a publicly traded company trading under the symbol (GSAC) that is engaged in research, development and marketing of innovative over-the-counter (OTC) consumer healthcare products.  The Company’s first product, GelStat™ Migraine is currently available direct-to-consumer and through numerous retailers nationwide.  Equally important, GelStat™ Arthritis is also available on a direct-to-consumer basis and GelStat™ Sleep is in its final stages of development. 

GelStat intends to capitalize on these markets by combining innovative formulations with uniquely advantageous delivery systems to provide consumers with clinically proven products that have improved efficacy, safety and convenience.  In line with this strategy, two clinical trials have been conducted on GelStat™ Migraine, both yielding positive results.  The first was an open label study that was performed by Roger K. Cady, M.D. and Curtis P. Schreiber, M.D., both of ClinVest, the research division of the Headache Care Center in Springfield, Missouri. 

The second was a double blind study performed by Dr. Sheena K. Aurora.  Dr. Aurora is a co-director of the Swedish Headache Center in Seattle, a specialty headache clinic that treats more than 3,000 patients per year.  She is also board-certified in neurology and electro-diagnostic medicine as well as has additional qualifications in clinical neurophysiology.

In addition, an unpublished clinical study on GelStat™ Arthritis yielding positive results was conducted by David Paul Rosen, MD and George Liakeas, MD.  Equally important to the aforementioned studies, the Company has received a plethora of testimonials supporting the effectiveness of both products.

Product Market Sizes

Most OTC products available today are based on decades-old formulations and technologies. GelStat’s goal is to combine innovative formulations with uniquely advantageous delivery systems to develop a portfolio of proprietary products with improved efficacy, safety, and/or convenience.

GelStat™ Migraine, the Company’s first such product, is intended to provide relief from migraine headaches and their associated symptoms.  Migraine afflicts 28 million Americans and OTC medications are used by 98% of sufferers, including 57% who rely on them exclusively.

However, less than 30% of sufferers are very satisfied with their usual migraine treatment, citing lack of efficacy and slow onset of action as primary complaints. Two-thirds of those using prescription meds delay or avoid taking their migraine medication because of concerns over side effects.  A new OTC migraine medication with proven efficacy – especially one that is fast-acting and offers a favorable side effect profile – is likely to be well received and might capture a significant share of the OTC market.  

GelStat™ Arthritis, provides relief from arthritis and its associated symptoms.  Arthritis is one of the most pervasive diseases in the United States and the leading cause of disability.  According to the Centers for Disease Control and Prevention, one out of every three Americans is affected by one of the more than 100 types of arthritis.
 
Non-steroidal anti-inflammatory drugs (NSAIDS) are commonly used in the elderly for the treatment of fever, pain, pain associated with inflammation in rheumatoid arthritis and osteoarthritis, neuromuscular disorders, headache, and musculoskeletal conditions.  Each year in the United States people spend $5-$10 billion on prescription and over-the-counter NSAIDS.

Available only by prescription, the newest subset of NSAIDs, the COX-2 inhibitors, helps reduce pain and inflammation like traditional NSAIDs, but are designed to be safer for the stomach.  The top COX-2 inhibitors accounted for $3.8 billion in U.S. sales in 2003 including Celebrex ($2.2 billion) and Vioxx ($1.6 billion).  With Vioxx now off the market and the safety of Celebrex in question, there is a significant opportunity to grab market share.

GelStat™ Sleep provides relief from sleep disorders and its associated symptoms.  An estimated 30%-50% of the general population is affected by insomnia, and 10% have chronic insomnia. The leading prescription drug to treat insomnia is Ambien, which generated an estimated $1.89 billion in revenues in 2005, accounting for approximately 60% of the insomnia prescription market.   Furthermore, billions of dollars are spent each year on OTC products such as Nytol, Sleep-Eze and Sominex.  Insomnia sufferers have reported dissatisfaction with current treatments citing numerous side effects including drowsiness, fatigue, and nervousness.   GelStat™ Sleep was developed to address these issues and was formulated using active ingredients that have been used for centuries in eastern medicine.  While GelStat™ Sleep is not available in retail stores, test patients are reporting positive results and pushing the Company to get the product on the market.    

Disclaimer
Except for the historical information contained herein, the matters discussed in this Corporate Backgrounder are forward-looking statements that involve
risks and uncertainties, including but not limited to business conditions and the amount of growth in the computer industry and general economy, competitive
factors, and other risks detailed from time to time in the Company's SEC reports, including but not limited to its annual report on Form 10-K and its quarterly
reports on Forms 10-Q. The Company does not undertake any obligation to update forward-looking statements. All trademarks and brand names are the
property of their respective companies.