================================================================================
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from __ to__
Commission file number 0-25852
THE MED-DESIGN CORPORATION
Delaware 77-0404919
-------- ----------
(State of Incorporation) (IRS Employer ID Number)
2810 Bunsen Avenue, Ventura, CA 93003
-------------------------------------
(805)339-0375
-------------
Check whether issuer (1) filed all reports required to be filed by Section
13 or 15(d) for the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock - 7,951,570 shares of Common Stock, $.01 par value,
outstanding as of May 13, 1998.
================================================================================
<PAGE>
THE MED-DESIGN CORPORATION
FORM 10-QSB
<TABLE>
<CAPTION>
INDEX
Page Number
PART 1 - FINANCIAL INFORMATION
Item 1- Financial Statements
<S> <C>
Consolidated Balanced Sheets as of March 31, 1998 (unaudited) and as of
December 31, 1997 .......................................................................................3
Consolidated Statements of Operations for the three months ended March 31, 1998
and 1997 and Cumulative During Development Stage (unaudited).............................................4
Consolidated Statements of Comprehensive Loss for the three months
ended March 31, 1998 and 1997 and Cumulative During Development
Stage (unaudited)........................................................................................5
Consolidated Statements of Cash Flows for the three months ended March 31, 1998
and 1997 and Cumulative During Development Stage (unaudited) ............................................6
Notes to Consolidated Financial Statements (unaudited) ................................................7-8
Item 2- Management's Discussion and Analysis of Plan of Operation ..............................................9-12
PART II - OTHER INFORMATION
Item 1- Legal Proceedings ........................................................................................13
Item 2- Changes in Securities ....................................................................................13
Item 3- Defaults upon Senior Securities ..........................................................................13
Item 4- Submission of Matters to a Vote of Security Holders ......................................................13
Item 5- Other Information ........................................................................................13
Item 6- Exhibits and Reports on Form 8-K .........................................................................13
</TABLE>
2
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 120,008 $ 114,079
Short-term investment -- 546,591
Available-for-sale securities 3,390,581 5,617,284
Prepaid expenses and other current assets 86,324 152,547
------------ ------------
Total current assets 3,596,913 6,430,501
Property, plant, and equipment, net of accumulated
depreciation and amortization of $466,854 and $406,781
at March 31, 1998 and December 31, 1997, respectively 1,121,408 1,181,481
Patents, net of accumulated amortization of $52,325 and $44,164
at March 31, 1998 and December 31, 1997, respectively 763,626 681,048
------------ ------------
$ 5,481,947 $ 8,293,030
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 2,929,885 $ 4,630,500
Accounts payable 208,386 205,625
Accrued expenses 104,298 213,042
Current maturities of long-term debt and capital lease obligations 11,197 199,821
------------ ------------
Total current liabilities 3,253,766 5,248,988
------------ ------------
Long-term debt and capital lease obligations, less current maturities 38,866 154,674
------------ ------------
Total liabilities 3,292,632 5,403,662
------------ ------------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares outstanding -- --
Common stock, $.01 par value, 20,000,000 shares authorized;
7,951,570 shares issued and outstanding
at March 31, 1998 and December 31, 1997, respectively 79,516 79,516
Additional paid-in capital 21,812,694 21,764,194
Deficit accumulated during the development stage (19,706,007) (18,967,241)
Accumulated other comprehensive income 3,112 12,899
------------ ------------
Total stockholders' equity 2,189,315 2,889,368
------------ ------------
$ 5,481,947 $ 8,293,030
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative Three Months Ended March 31,
From Inception, ----------------------------
December 13, 1993
to March 31, 1998 1998 1997
----------------- ------------ ------------
<S> <C> <C> <C>
Operating expense:
Marketing $ 603,346 $ 32,777 $ 50,492
General and administrative 8,587,862 522,042 785,159
Research and development 4,053,562 284,652 365,692
Purchased research and
development 5,932,770 -- --
------------ ------------ ------------
Total operating expenses 19,177,540 839,471 1,201,343
------------ ------------ ------------
Loss from operations (19,177,540) (839,471) (1,201,343)
Interest expense (1,693,390) (63,285) (121,263)
Investment income 1,164,923 163,990 141,410
------------ ------------ ------------
Net loss ($19,706,007) ($ 738,766) ($ 1,181,196)
============ ============ ============
Basic and diluted earnings
per share ($ 0.09) ($ 0.15)
============ ============
Weighted average common
shares outstanding 7,951,570 7,656,592
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative Three Months Ended March 31,
From Inception, ----------------------------
December 13, 1993
to March 31, 1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net loss ($19,706,007) ($ 738,766) ($ 1,181,196)
Other comprehensive loss:
Unrealized holding gains (losses) on
securities 3,112 (9,787) (28,579)
------------ ------------ ------------
Comprehensive loss ($19,702,895) ($ 749,553) ($ 1,209,775)
============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative Three Months Ended March 31,
From Inception, ----------------------------
December 13, 1993
to March 31, 1998 1998 1997
----------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $(19,706,007) $ (738,766) $ (1,181,196)
Adjustments to reconcile net loss to operating
cash flows (net of acquisition):
Depreciation and amortization 500,583 68,234 57,200
Issuance of common stock for services 418,800 -- --
Purchased research and development 5,932,770 -- --
Issuance of common stock for interest 29,985 --
Issuance of warrants for services 890,500 48,500 100,000
Repricing of stock options 62,080 -- --
Amortization of original issued discount 650,000 -- --
Loss on sale of available-for-sale securities 2,962 -- --
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (83,816) 66,273 40,470
Accounts payable 100,665 2,761 72,535
Accrued expenses (186,195) (108,744) (77,723)
------------ ------------ ------------
Net cash used in operating activities (11,387,673) (661,792) (988,714)
------------ ------------ ------------
Cash flows from investing activities
Purchased of property and equipment (1,494,732) -- (55,878)
Additions to patents (358,714) (90,739) (4,426)
Payments for purchase of option to acquire
Med-Design Incorporated (125,000) -- --
Investments in available-for-sale securities (5,607,347) -- (3,318,172)
Sale of available-for-sale securities 2,216,916 2,216,916 --
Notes receivable funded (92,500) -- --
Sale of short-term investment -- 546,591 --
------------ ------------ ------------
Net cash (used in) provided by investing activities (5,461,377) 2,672,768 (3,378,476)
------------ ------------ ------------
Cash flows from financing activities:
Capital lease payments (35,246) (7,892) (2,803)
Proceeds from long-term borrowings 706,095 -- --
Repayment of long-term borrowings (706,089) (296,540) (70,148)
Proceeds from issuance of common stock, prior to
initial public offering 97,250 -- --
Proceeds from exercise of options 35,000 -- --
Proceeds from issuance of common stock in connection
with exercise of warrants 798,700 -- 107,800
Proceeds from short-term borrowing 6,630,500 -- 184,000
Repayment of short-term borrowing (3,700,615) (1,700,615) (2,000,000)
Other -- -- 14,136
Repayment of acquisition note (1,000,000) -- --
Proceeds of initial public offering, net of offering costs 9,525,966 -- --
Proceeds of private placement, net of offering costs 4,617,497 -- 4,619,353
------------ ------------ ------------
Net cash (used in) provided by financing activities 16,969,058 (2,005,047) 2,852,338
------------ ------------ ------------
Increase(decrease) in cash 120,008 5,929 (1,514,852)
Cash and cash equivalents, beginning of period -- 114,079 1,648,639
------------ ------------ ------------
Cash and cash equivalents, end of period $ 120,008 $ 120,008 $ 133,787
============ ============ ============
Cash paid during the period:
Interest $ 1,091,672 $ 169,990 $ 141,359
============ ============ ============
Noncash financing activities:
Issuance of common stock for rights under option
to acquire Med-Design, Inc. $ 100,000 -- --
------------ ------------ ------------
Issuance of warrants in partial payment of patents $ 300,833 -- --
------------ ------------ ------------
Issuance of common stock in connection with
short-term borrowing $ 650,000 -- --
------------ ------------ ------------
Capital lease obligation incurred $ 85,303 -- --
------------ ------------ ------------
Change in unrealized gain on available-
for-sale securities $ 3,112 $ (9,787) $ (28,579)
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements
</TABLE>
6
<PAGE>
MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The financial information included herein is unaudited, except for the
balance sheet as of December 31, 1997; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of results for the
interim period.
The accompanying financial statements include The Med-Design Corporation
(hereinafter, including its subsidiaries as the context requires, the "Company")
and its wholly-owned subsidiaries, MDC Investment Holdings, Inc. ("MDC
Holdings") and MDC Research Ltd. All significant intercompany transactions and
accounts are eliminated.
The financial statements included herein have been prepared in accordance
with generally accepted accounting principles and the instructions to Form
10-QSB and Rule 10-01 of Regulation S-X. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. These consolidated financial statements should be read in conjunction
with the Company's audited financial statements for the year ended December 31,
1997, which were included as part of the Company's Annual Report on Form 10-KSB.
Operating results for the three month period ending March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998.
2. Weighted Average Shares of Common Stock Outstanding
The calculations of weighted average shares of common stock excludes
outstanding options and warrants, since these securities have an anti-dilutive
effect on per share data.
3. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income" effective January 1, 1998. The new rules
establish standards for the reporting of comprehensive income and its components
in the financial statements. Comprehensive income consists of net income and
other gains and losses affecting shareholders' equity that, under generally
accepted accounting principles, are excluded from net income. Such items consist
primarily of unrealized gains and losses on marketable equity investments for
the Company.
7
<PAGE>
MED-DESIGN CORPORATION AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd.)
(Unaudited)
4. Basic and Diluted Loss Per Share
The following table sets forth the computation of basic and diluted net loss per
share:
<TABLE>
<CAPTION>
Loss Common Shares
Numerator Denominator EPS
----------- ----------- --------
<S> <C> <C> <C>
Three months ended March 31, 1998
- ---------------------------------
Basic and diluted EPS
- ---------------------------------
Net loss to common shareholders ($ 738,766) 7,951,570 ($ 0.09)
----------- ----------- --------
Three months ended March 31, 1997
- ---------------------------------
Basic and diluted EPS
- ---------------------------------
Net loss to common shareholders ($1,181,196) 7,656,592 ($ 0.15)
----------- ----------- --------
</TABLE>
Options and warrants to purchase 1,204,000 shares of common stock as of March
31, 1998 and 761,000 as of March 31, 1997, were not included in computing
diluted earnings per share as the effect was antiduluted.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Form 10-QSB contains
forward-looking statements relating to such matters as anticipated business
performance, business prospects, technological developments, product
development, new products, research and development activities and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, The Med-Design Corporation (the "Company") notes that these
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in these
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the sections of this Form 10-QSB
entitled "Management's Discussion and Analysis or Plan of Operation - Business
Overview," "Management's Discussion and Analysis or Plan of Operation Results of
Operations," "Management's Discussion and Analysis or Plan of Operation - Plan
of Operation," "Management's Discussion and Analysis or Plan of Operation -
Liquidity and Capital Resources." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements, to reflect events or
circumstances that arise after the date hereof. Readers should carefully review
the risk factors described in other documents that the Company files from time
to time with the Securities and Exchange Commission and in public communications
made by the Company.
Business Overview
The Company was incorporated in Delaware on November 14, 1994. On February
28, 1995, The Med-Design Corporation, a Pennsylvania corporation, incorporated
on December 13, 1993, was merged with and into the Company. The Company is a
development stage enterprise as defined by Financial Accounting Standards
("FAS") No. 7, "Accounting and Reporting by Development Stage Enterprise."
The Company designs and develops safety medical devices intended to reduce
the incidence of accidental needlesticks. The Company has three core products
under development: the Retractable Needle Hypodermic Syringe (the "Safety
Syringe"), the Retractable Needle Vacuum Tube Phlebotomy Set (the "Safety
Phlebotomy Set"), and the Retractable Needle Intravenous Catheter Insertion
Device (the "Safety Catheter"). These products are similar in appearance and
size to the standard devices in use. Such products incorporate the Company's
novel proprietary retraction technology that enables a health care professional,
with no substantial change in operating technique and using one hand, to
permanently retract the needle of the device into the body of the device that
can be safely discarded.
The Company also has several new safety products which are in various
stages of development. These new product developments include the Safety
Pre-Filled Vial Injector, Safety PICC Introducer Catheter Insertion Device,
Safety Guidewire Introducer, Safety Winged Set Blood Collection Needle, and
Safety Arterial Blood Gas Syringe. These products also incorporate the Company's
proprietary retraction technology and are designed to reduce the incidence of
accidental needlesticks. The Company has developed various sizes and designs of
these products to accommodate the specific requirements of potential strategic
alliances for medical and dental applications.
On March 14, 1995, the Company organized a wholly-owned subsidiary, MDC
Investment Holdings, Inc. ("MDC Holdings"), under the laws of the State of
Delaware. The Company entered into an Agreement of Merger on April 5, 1995 (the
"Merger Agreement") with MDC Holdings and MDI, pursuant to which MDI merged with
and into MDC Holdings, the surviving corporation (the "Merger"), and the Company
issued and delivered 1,219,742 shares of Common Stock to the MDI shareholders in
exchange for their shares of MDI Common Stock. In addition, the Company issued a
non-interest bearing promissory note in the principal amount of $1,000,000 (the
"Note") payable to the former MDI shareholders, which was collateralized by all
of the issued and outstanding
9
<PAGE>
Business Overview (continued)
shares of the Common Stock, $ 0.01 par value per share, of MDC Holdings. In
connection with the Merger, the Company issued and delivered 3,572 shares of
Common Stock to a former noteholder of MDI to satisfy an obligation of MDI. The
Note was fully paid from a portion of the net proceeds of the Company's initial
public offering of 3,450,000 shares of its Common Stock in June 1995 ("Initial
Public Offering"). The Company's acquisition of MDI was accounted for in
accordance with the purchase method, under which the purchase price was
allocated to the assets of MDI based on the fair market value of such assets.
The excess of the purchase price over the fair market value of the net assets
acquired was treated as purchased research.
Immediately following the consummation of the Merger, MDC Holdings
transferred all of the assets it acquired in the Merger, other than its patents
and other intellectual property, and all of its liabilities to MDC Research
Ltd., a California corporation and wholly-owned subsidiary of MDC Holdings.
As a result of the Merger, MDC Holdings became the sole owner of all the
intellectual property rights worldwide including patents, patent applications,
trademarks and trademark applications relating to the Safety Syringe, Safety
Phlebotomy Set and Safety Catheter.
In June 1995, the Company completed its Initial Public Offering of
3,450,000 shares of Common Stock, par value $0.01 per share. The net proceeds to
the Company were approximately $9,526,000.
On January 31, 1996, the Board of Directors authorized a one-for-one stock
dividend that was distributed on February 26, 1996 to shareholders of record as
of February 12, 1996. The information contained in the consolidated financial
statements and the notes thereto and in this report have been adjusted to
reflect this stock dividend.
On January 23, 1997, the Company completed a sale ("Placement") of
1,000,000 shares of Common Stock at a price of $5.00 per share pursuant to a
private placement of such securities to certain "accredited investors" (pursuant
to Regulation D of the Securities Act of 1933, as amended). The Company received
proceeds of approximately $4,617,000, net of expenses incurred in connection
with the Placement.
In connection with the Placement, for nominal consideration, the Company
agreed to sell warrants to Fine Equities, Inc., the Company's placement agent
with respect to the Placement (the "Placement Agent"), to purchase 100,000
shares of Common Stock ("Placement Agent Warrants"). The Placement Agent
Warrants are exercisable at a price of $5.50 a share of Common Stock for a
period of four years commencing January 22, 1998.
On August 6, 1997, the Company acquired two patents from John Kulli, M.D.
In connection with the acquisition of these patents, the Company paid $75,000
cash and issued warrants to purchase 75,000 shares of its Common Stock at $5.75.
These warrants are exercisable on or before August 6, 2002.
On February 23, 1998, the company signed an agreement with Graphic Controls
Corporation for the development and licensing of its proprietary Safety
Intravenous Catheter Insertion Device. The signing of this agreement and the
completion of a series of mutually agreed upon milestones would result in
payment to Med-Design totaling as much as $3.72 million with continuous
royalties for the life of the patents. Med-Design would receive $1.82 million of
the $3.72 million during the completion of milestones associated with the
development phase and $1.9 million in milestone payments associated with the
granting of an exclusive license for North America.
10
<PAGE>
Results of Operations
The Company has devoted substantially all of its research and development
efforts since its formation to the development related to safety needles and the
designs and development of the equipment necessary to assemble the safety needle
device.
Research and development expenses amounted to $284,652 and $365,692 for the
three month period ending March 31, 1998 and 1997, respectively.
Plan of Operation
The Company plans to focus primarily on the completion of all milestones
related to the agreement with Graphic Controls Corporation. This includes the
completion of engineering development and the production of a limited number of
Safety Catheters for proof of functionality, validation testing, market
acceptance and manufacturability. The engineering development and proof of
functionality, validation testing and manufacturability of the Safety Catheter
will also contribute to the development of the Safety PICC Introducer Catheter
Insertion Device, and to some degree to other of the Company's safety products,
because of the commonality of the retraction technology features. The Company
plans to complete all issues pertaining to the filing and prosecution of the
patents on the Safety Catheter, as well as refile a 510(k) pre-market
notification with the FDA.
The Company also plans to continue discussions and negotiations with third
parties regarding the licensing or joint venture of its other products. The
Company plans to support these discussions and negotiations with available
funds, including the building of necessary prototypes.
The Ventura Facility contains a research and development laboratory
equipped with assembly and test equipment for concept modeling and product
development and a machine shop equipped with machine tools for fabrication of
new product parts for concept modeling and assembly and test fixtures. The
Company also installed a 3,120 square foot Class 100,000 clean room at the
Ventura facility, which is currently being used for the assembly of prototypes
and products. The Company had originally planned to install in the clean room a
fully automated robotic assembly system to pilot manufacture its products. The
Company, however, elected not to install the fully automated robotic assembly
system at this time because it is currently investigating opportunities with
third parties in the United States and abroad to manufacture the Safety Syringe,
the Safety Phlebotomy Set and the Safety Catheter and certain of its other
products under development either on a contract manufacturing basis, under
licensing agreements or through other forms of joint ventures. The Company has
entered into a significant number of confidentiality agreements with other
companies for the purpose of exploring such opportunities. The Company is also
investigating opportunities with third parties to manufacture, market and
distribute the Company's products. The Company anticipates that entering into
alliances and licensing arrangements with third parties would enable the Company
to increase the market penetration of its products more quickly than the Company
could achieve on its own.
As a result of discussions which it has had with third parties, the Company
has installed a semi-automated assembly system at the Ventura Facility to pilot
manufacture its products. The objective of the Company in installing the
assembly system is to demonstrate to potential third party manufacturers the
economic feasibility of the commercial production of its products. The
semi-automated assembly system, which consists of a series of manual and
semi-automatic stations, is capable of producing up to 3,000,000 units per year.
The assembly system will produce one or more of the Company's products at a
time, and has the capability of being converted at a reasonable cost with
minimal delay to manufacture a different product at such time as the Company may
decide. The Company completed the system during the third quarter of 1997.
11
<PAGE>
Plan of operation (Continued)
As of May 13, 1998, the Company employed 17 people on a full-time basis and
one person on a part-time basis. The Company does not anticipate increasing the
number of employees in the areas of product development, manufacturing, sales
and marketing. The Company will however reassess its personnel requirements as
business activity dictates.
Liquidity and Capital Resources
In 1995, the Company issued warrants to purchase 400,000 shares of Common
Stock, of which warrants to purchase 163,000 shares have been exercised as of
May 13, 1998. In 1997 and 1998, the Company issued warrants to purchase 375,000
shares and 150,000 shares, respectively, of Common Stock. As of May 13, 1998,
the Company has received an aggregate of $798,700 upon the exercise of said
warrants. If the remainder of the warrants were exercised, the Company would
receive approximately an additional $3,024,650, net of registration and other
costs to be paid by the Company as required under the terms of such warrants.
On May 14, 1998, the Company renewed its ("Loan Agreement") with its
principal lending institution for $6,750,000, including an Equipment Facility.
The Company had additional availability against its line of credit and equipment
financing facility of approximately $3,820,000 at March 31, 1998. The Loan
Agreement provides that advances for equipment financing will not exceed
$600,000 of the $6,750,000. Under the terms of the Loan Agreement, all
borrowings must be fully collateralized by available-for-sale securities, cash
equivalents, equipment financed, and general intangibles of the Company. The
Loan Agreement expires May 30, 1999.
The Company believes that if the milestones associated with the Graphic
Controls' agreement are met on a timely basis and the management plan of action
of cost containment measures with focus on strategic alliances and licensing
arrangements is achieved, it will have sufficient funds to support its planned
operations and capital expenditures through March 31, 1999. The Company
thereafter, however, believes that it will need to raise additional funds
through public or private financing to support its planned operations and
capital expenditures. The Company believes that it will require additional
capital before it reaches profitability and positive cash flow, if at all. No
assurance can be given that the Graphic Controls' milestones will be met timely,
or that additional financing will be available or that, if available, it will be
available on terms favorable to the Company or its shareholders. If adequate
funds are not available to satisfy short-term or long-term capital requirements,
the Company may be required to reduce substantially, or eliminate, certain areas
of its product development activities, limit its operations significantly, or
otherwise modify its business strategy. The Company's capital requirements will
depend on may factors, including but not limited, to the progress of its
research and development programs, the development of regulatory submissions and
approval, pilot manufacturing capability, the costs associated with protecting
its patents and other proprietary rights.
There are no other material commitments at this time.
12
<PAGE>
Part 11 - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) List of Exhibits filed pursuant to Item 601 of Regulation S-B. The
following exhibits are filed with this Report on Form 10-QSB.
Exhibit
Number Description
- ------ -----------
27* Financial Data Schedule.
(b) No reports on Form 8-K have been filed during the quarter
ended March 31, 1998.
* Electronic filing only.
13
<PAGE>
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.
The Med-Design Corporation
Date: May 13, 1998
/s/ James M. Donegan
--------------------------------
James M. Donegan
Chief Executive Officer
/s/ Lawrence D. Ellis
--------------------------------
Lawrence D. Ellis
(Acting Chief Financial Officer)
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 120,008
<SECURITIES> 3,390,581
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,596,913
<PP&E> 2,404,213
<DEPRECIATION> 519,179
<TOTAL-ASSETS> 5,481,947
<CURRENT-LIABILITIES> 3,253,766
<BONDS> 38,866
0
0
<COMMON> 79,516
<OTHER-SE> 2,189,315
<TOTAL-LIABILITY-AND-EQUITY> 5,481,947
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (839,471)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,285
<INCOME-PRETAX> (738,766)
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