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 SEPTEMBER 30, 1999
( ) 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 - 7,951,770 SHARES OF COMMON
STOCK, $.01 PAR VALUE, OUTSTANDING AS
OF NOVEMBER 12, 1999.
THE MED-DESIGN CORPORATION
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
PART 1 - FINANCIAL INFORMATION
Item 1- Financial Statements
<S> <C> <C>
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and as of
December 31, 1998 ..............................................................................................3
Consolidated Statements of Operations for the three and nine months ended
September 30, 1999 and 1998 (unaudited) ........................................................................4
Consolidated Statements of Comprehensive Loss for the three and
nine months ended September 30, 1999 and 1998 (unaudited) ......................................................5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 (unaudited) ........................................................................6
Notes to Consolidated Financial Statements (unaudited) .........................................................7
Item 2- Management's Discussion and Analysis of Plan of Operation .....................................................8-12
PART II - OTHER INFORMATION
Item 1- Legal Proceedings ...............................................................................................13
Item 2- Changes in Securities ...........................................................................................13
s
Item 3- Defaults upon Senior Securities .................................................................................13
Item 4- Submission of Matters to a Vote of Security Holders ..........................................................13-14
Item 5- Other Information ...............................................................................................14
Item 6- Exhibits and Reports on Form 8-K ................................................................................14
</TABLE>
2
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 784,571 $ 32,883
Available-for-sale securities 2,638,714 6,111,620
Prepaid expenses and other current assets 248,049 173,006
Total current assets 3,671,334 6,317,509
Property, plant, and equipment, net of accumulated
depreciation and amortization of $787,961 and $619,113
at September 30, 1999 and December 31, 1998, respectively 730,729 865,267
Patents, net of accumulated amortization of $113,778 and $80,766
at September 30, 1999 and December 31, 1998, respectively 904,951 788,629
Debt issue costs, net of accumulated amortization of $127,100 and
$53,720 at September 30, 1999 and December 31, 1998, respectively 438,100 511,480
Total Assets $ 5,745,114 $ 8,482,885
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 250,000 $ 250,000
Current maturities of long-term debt and capital lease obligations 12,251 10,492
Accounts payable 221,123 215,426
Accrued expenses 124,358 176,697
------------- --------------
Total current liabilities 607,732 652,615
Long-term debt and capital lease obligations, less current maturities 1,578,556 1,579,824
Total liabilities 2,186,288 2,232,439
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
300,000 shares issued and outstanding 3,000 3,000
Common stock, $.01 par value, 20,000,000 shares authorized;
7,951,770 shares issued and outstanding
at September 30, 1999 and December 31, 1998, respectively 79,518 79,516
Additional paid-in capital 24,319,782 24,244,554
Accumulated deficit (20,848,600)
(18,084,352)
Accumulated other comprehensive income 5,126 7,728
Total stockholders' equity 3,558,826 6,250,446
Total Liabilities and Stockholders' Equity $ 5,745,114 $ 8,482,885
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating expense:
Marketing -- $6,319 -- $78,361
General and administrative $612,253 478,822 $1,786,830 1,558,898
Research and development 296,877 254,154 920,313 825,740
---------- --------- ----------- -----------
Total operating expenses 909,130 739,295 2,707,143 2,462,999
Loss from operations (909,130) (739,295) (2,707,143) (2,462,999)
Interest expense (88,566) (72,149) (225,071) (196,383)
Investment income 49,419 35,169 167,966 246,919
Net loss ($948,277) ($776,275) ($2,764,248) ($2,412,463)
Basic and diluted earnings per common share
($0.12) ($0.10) ($0.35) ($0.30)
Weighted average common shares outstanding
7,951,703 7,951,570 7,951,603 7,951,570
========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net loss ($948,277) ($776,275) ($2,764,248) ($2,412,463)
Other comprehensive loss:
Unrealized holding
losses on securities (2,602) (401) (2,602) (11,954)
Comprehensive loss ($950,879) ($776,676) ($2,766,850) ($2,424,417)
========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
THE MED-DESIGN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Loss ($2,764,248) ($2,412,463)
Adjustments to reconcile net loss to operating
cash flows:
Depreciation and amortization 201,858 225,561
Issuance of warrants for services 145,501
Amortization of debt issue costs 73,380 35,032
Debt issue cost in connection with
private investor loan 74,580
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (75,043) (67,009)
Accounts payable 5,697 (110,356)
Accrued expenses (52,339) (24,204)
Net cash used in operating activities (2,536,115) (2,207,938)
----------- -----------
Cash flows from investing activities
Sale (purchases) of property and equipment (23,508) 63,795
Additions to patents (149,334) (122,653)
Investment in available-for-sale-securities (1,474,587)
Sale of available-for-sale securities 3,470,304 6,436,487
Sale of short-term investment 546,591
----------- -----------
Net cash provided by investing activities 3,297,462 5,449,633
----------- -----------
Cash flows from financing activities:
Capital lease payments (10,309) (14,291)
Stock options exercised 650
Repayment of long-term borrowings (296,546)
Proceeds from short-term borrowings 250,000
Repayment of short-term borrowing (4,630,500)
Debt issue costs (76,000)
Proceeds of private placement, debenture bond 1,550,000
-----------
Net cash used in financing activities (9,659) (3,217,337)
----------- -----------
Increase in cash 751,688 24,358
Cash and cash equivalents, beginning of period 32,883 114,079
----------- -----------
Cash and cash equivalents, end of period $ 784,571 $ 138,437
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
MED-DESIGN CORPORATION AND SUBSIDIARIES
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, 1998; 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 310(b) of Regulation S-B. 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,
1998, which were included as part of the Company's Annual Report on Form
10-KSB-A. Operating results for the three month period and nine month period
ending September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1999.
2. Basic and Diluted Loss Per Share
The following table sets forth the computation of basic and diluted net loss per
share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Loss ($948,277) ($776,275) ($2,764,248) ($2,412,463)
========= ========= =========== ===========
Weighted average common shares outstanding
used to compute basic and diluted net loss per
common share 7,951,703 7,951,570 7,951,603 7,951,570
========= ========= =========== ===========
Basic and diluted net loss per share ($0.12) ($0.10) ($0.35) ($0.30)
========= ========= =========== ===========
</TABLE>
Options and warrants to purchase 1,802,467 shares of common stock as of
September 30, 1999 and 1,364,000 as of September 30, 1998, were not included in
computing diluted earnings per share as the effect was antidilutive.
Convertible debentures with an option to purchase 1,240,000 shares of common
stock, a promissory note issued in connection with a loan with a commitment to
issue 43,723 shares of common stock and Series A Convertible Preferred Stock
convertible into 300,000 shares of common stock, were not included in computing
dilutive earnings per share at September 30, 1999 as the effect was
antidilutive.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
In addition to historical information, the Management's Discussion and
Analysis or Plan of Operation 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. Words such as "may," "should,"
"anticipate," "believe," "plan," "estimate," "expect," and "intend" and other
similar expressions are intended to identify forward-looking statements. 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 ("Med-Design") 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 the Management's
Discussion and Analysis or Plan of Operation entitled "Management's Discussion
and Analysis or Plan of Operation - Results of Operation," "Management's
Discussion and Analysis or Plan of Operation - Plan of Operation," "Management's
Discussion and Analysis or Plan of Operation - Year 2000 Issues," "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.
Med-Design 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 Med-Design files from time to time with the Securities and Exchange
Commission and in public communications made by Med-Design.
Business Overview
The Company was incorporated in Delaware on November 14, 1994. The Company
formed a wholly owned subsidiary, MDC Investment Holdings, Inc. also a Delaware
Corporation, which is the owner of the intellectual property of the Company. MDC
Research Limited is a California Company which is a wholly owned subsidiary of
MDC Investment Holdings, Inc.
The Company is solely focused on designing and developing safety medical
needle devices intended to reduce the incidence of accidental needle sticks to
patients and health care workers. This has been the primary focus of the Company
since inception. The Company recognized the need for superior devices to help
eliminate what is becoming a growing menace to patients and health care workers
alike. Studies have estimated that as many as 800,000 accidental needle sticks
occur yearly in the United States. Many authorities believe that this number
should be much higher since many accidental needle sticks are not reported.
As a result of the Company's focus, it has designed and developed 24 safety
needle products all utilizing similar patented proprietary technology. All of
these devices are designed to reduce or eliminate the possibility of an
accidental needle stick. These products include the Safety Hypodermic Syringe,
Safety Blood Collection Needle, Safety Intravenous Catheter Insertion Device,
Safety PICC Introducer Catheter Insertion Device, Safety Guidewire Introducer,
Safety Winged Set Blood Collection Needle, Safety Arterial Blood Gas Syringe,
Safety Pre-Filled Vial Injector, Safety Pre-Filled Glass Syringe, Safety Wing
Needle Set/Catheter, Safety Blood Donor Needle, Safety Y-Port Infusion Needle,
and Safety Winged Fistula Needle, and a number of additional products in early
stages of development. These products are similar in appearance and size to the
standard devices in use. Such products incorporate the Company's novel
proprietary needle retraction technology that enables a health care professional
with no substantial change in operating technique in using one hand to
permanently retract the needle into the body of the device that can then be
safely discarded.
8
<PAGE>
Business Overview (continued)
The Company's primary facility is located at 2810 Bunsen Avenue, Ventura,
California 93003. This location houses the research and development staff,
machine shop, model making facilities, office space, a clean room and pilot
manufacturing facilities. The manufacturing facilities are primarily designed
for pilot manufacturing to test and prove the manufacturability of the Company's
product design. The Company has the potential for commercial manufacturing from
this site should it so choose.
In June, 1995, the Company completed its initial public offering of
3,450,000 shares of common stock, par value .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 all shareholders of record
as of February 12, 1996.
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.
From June 29, 1998 to July 22, 1998 the Company completed a $1,550,000
Private Placement of certain convertible debentures secured by the Company's
intellectual properties. The net proceeds to the Company was $1,474,000.
On December 11, 1998, The Med-Design Corporation signed a Multi-Product
Licensing Agreement, an Option Licensing Agreement and an Equity Agreement with
Becton, Dickinson and Company, ("Becton Dickinson"), a New Jersey based global
medical technology company. The Med-Design Corporation granted Becton Dickinson
the exclusive worldwide rights to manufacture and sell Med-Design's Safety Blood
Collection Needle, Safety Winged Set Blood Collection Needle, Safety I.V.
Catheter, Safety Wing Needle Set/Catheter and Safety PICC Introducer Catheter
Insertion Device and a one year option, with terms and conditions to be
negotiated, to license the Safety Hypodermic Syringe (luer type), the Safety
Arterial Blood Gas Syringe (add-on type), the Safety Pre-Filled Glass Syringe
(fixed or stake needle type), and the Safety Pre-Filled Glass Syringe (luer
type). Under the terms of the agreements, Med-Design received an initial,
non-refundable payment of $4.5 million, an equity investment of $1.5 million and
continuing royalty payments for the life of the patents payable on Becton
Dickinson's net sales of licensed products. Becton Dickinson invested $1.5
million in Med-Design through the purchase of 300,000 shares of Series A
Convertible Preferred Stock, convertible into Med-Design's common shares at
$5.00 per share. Becton Dickinson is entitled to designate one member on
Med-Design's Board of Directors. Med-Design previously signed a development and
licensing agreement for its proprietary Safety I.V. Catheter with Graphic
Controls Corporation, which was canceled by mutual agreement with no obligation
to either party.
Thereafter, the Company entered into a second contract with Becton
Dickinson on July 27, 1999 whereby the Company agreed to perform certain
additional services for Becton Dickinson to prepare for FDA 510(k) Pre-Market
Notification for certain products licensed to Becton Dickinson.
The Company has completed the transfer of technology for three (3) of the
five (5) licensed products. It anticipates completing the transfer of technology
on the remaining two (2) products within the first quarter of 2000.
The Company is cognizant of growing legislative initiative in many states
and the federal government to mandate a conversion to safety needle devices. To
date, four states (California, Texas, Maryland, Tennessee) have passed
legislation to mandate or explore the compulsory need for safety needle
products. A federal act to accomplish the same purpose has been introduced in
both the House and Senate. OSHA has issued new Compliance Directives to enforce
the use of available approved and effective safety engineered needles in
virtually every health care workplace in the United States. The Company feels
that the attention of legislative
Business Overview (continued)
bodies all over the country to the pressing need for the adoption of safety
medical devices will focus increased attention on the Company's products. The
Company is in a unique position to capitalize upon this increased attention
because the portfolio of safety products that it has developed or is developing
covers a broad spectrum of medical use.
9
<PAGE>
Year 2000 Issues
The "Year 2000 Issue" describes the use of two digits rather than four
digits to define the applicable year in certain computer programs. In the Year
2000, any of Med-Design's computer programs that have two digit date-sensitive
software may interpret a date of "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
discrepancies of operations. Med-Design's business operations are dependent upon
internal software, suppliers and Becton Dickinson, Med-Design's licensee.
Med-Design has reviewed its internal program and has determined that there
are no material Year 2000 issues within Med-Design's systems. Med-Design has
engaged its network service provider to examine all software utilized in
Med-Design's operations to ensure Year 2000 compliance. Additionally, Med-Design
is working with its suppliers and its licensee to determine the extent to which
such third parties' systems (insofar as they relate to Med-Design's business)
are subject to the Year 2000 issue, and expects to complete such inquiries, and
remedy any material issues before the end of 1999. Med-Design estimates that the
total costs of the Year 2000 project will be approximately $10,000, $4,000 of
which represents capital costs and approximately $6,000 represents costs to
outside vendors. As of September 30, 1999, Med-Design had incurred approximately
$6,000 of Year 2000 costs. Due to the uncertainty inherent in the Year 2000
process, Med-Design is unable to determine a reasonable worst case scenario at
this time. The costs of the Year 2000 project and the date on which Med-Design
plans to complete the Year 2000 project tasks are based on management's best
estimates which were determined utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification factors and other factors. As a result, there can be no assurance
that these forward looking estimates will be achieved, and the actual costs and
compliance by vendors, licensees and other third parties could differ materially
from Med-Design's current expectations, resulting in material financial risk.
Results of Operations
The Company has devoted substantially all of its research and development
efforts since its formation to 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 $920,313 and $825,740 for the
nine month period ending September 30, 1999 and 1998, respectively.
Plan of Operation
Med-Design plans to focus on the following four areas of activity in 1999:
technology transfer of the recently licensed products; the licensing and final
development of those products currently under option to Becton, Dickinson and
Company; the further development and licensing of additional products; the
development of incremental revenues related to design and development and
manufacturing agreements with licensing partners.
Technology Transfer
The transfer of technology for the Safety I.V. Catheter, Safety PICC
Introducer Catheter Insertion Device, and the Safety Winged Set Blood Collection
Needle to Becton Dickinson under the terms of a license agreement has been
completed. The transfer of technology for the Safety Blood Collection Needle and
the Safety Wing Needle Set/Catheter to Becton Dickinson is expected to be
completed during the first quarter of 2000.
Optional Products
Med-Design also plans to complete concept development of the Safety
Hypodermic Syringe (fixed or stake needle type), the Safety Hypodermic Syringe
(luer type), the Safety Arterial Blood Gas Syringe Needle (add-on type), the
10
<PAGE>
Safety Pre-Filled Glass Syringe (luer type), and the Safety Pre-Filled Glass
Syringe (fixed or stake needle type), each of which is subject to Becton
Dickinson's option to license. Med-Design is obligated, at Becton Dickinson's
request, to negotiate for the licensing of such products during the one year
term of the option agreement.
Additional Products
Med-Design also plans to advance concept development and modeling of
certain other products that are not currently under licensing or option
agreements, such as the Safety Pre-Filled Vial Injector. Med-Design also plans
to continue discussions and negotiations with third parties regarding the
licensing or joint venture of these products. Med-Design plans to support such
product development programs, discussions, and negotiations, including the
building of necessary prototypes with currently available funds.
Med-Design is also investigating opportunities with third parties to
manufacture, market and distribute Med-Design's products. Med-Design anticipates
that entering into alliances and licensing arrangements with third parties would
enable Med-Design to increase market penetration of its products more quickly
than Med-Design could achieve on its own. Med-Design has entered into such
arrangements with Beckon Dickinson as mentioned.
Other Business
Med-Design is currently in negotiations with third parties to provide
additional design, development and manufacturing in furtherance of the
commercialization of the products. Med-Design has sufficient facilities to
perform these tasks. Med-Design's facility in Ventura, California 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 fabrication of prototype molds and test fixtures. Med-Design also
installed a 3,120 square foot Class 100,000 clean room at the facility, which is
capable of being used for the semi-automated assembly of both prototypes and
products intended for sale.
As a result of discussions with third parties, Med-Design has installed a
semi-automated assembly system at the facility to pilot manufacture its products
in an effort 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, with additions and modifications, is capable of producing up to
6,000,000 units of commercial products per year. The assembly system will
produce one or more of Med-Design'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 Med-Design may decide. Med-Design completed
the system during the third quarter of 1997.
Med-Design anticipates earning revenues in 1999/2000 from one or more of
the following: licensing or optioning of additional products; third party
manufacturing agreement, third party development agreements and royalty payments
in association with licensed products.
As of September 30, 1999, Med-Design employed 17 people on a full-time
basis and one person on a part-time basis. Med-Design anticipates increasing
employees in certain strategic areas pending the outcome of continued
discussions and negotiations with third parties regarding the licensing or joint
venture of its early stage development products. Med-Design will however
reassess its personnel requirements as business activity dictates.
Liquidity and Capital Resources
At September 30, 1999, Med-Design was party to a revolving line of credit
totaling $3,000,000 with its principal lending institution. This facility can be
used to fund working capital needs and finance capital equipment purchases;
provided, however, that advances for capital equipment financing don't exceed
$600,000. Borrowings to meet working capital needs bear interest at LIBOR plus
2.25 basis points, while borrowings to finance capital equipment purchases bear
interest at prime plus 2.5%. Pursuant to the terms of the facility, all
borrowings must be fully collateralized by available-for-sale securities, cash,
cash equivalents, equipment financed, and general intangibles of Med-Design.
There was no obligation outstanding under the agreement at September 30, 1999.
The facility expires on June 30, 2000 and there is no assurance that Med-Design
will be successful in negotiating a continuation of the availability of the Loan
Agreement and what terms will be made available to Med-Design.
Management believes that Med-Design has sufficient funds to support its
planned operations and capital expenditures for the next twelve months.
Thereafter Med-Design will rely on negotiating licensing and royalty agreements
11
<PAGE>
with its current and future strategic partners. Becton Dickinson, as part of the
option licensing agreement, was granted an option to license several products.
No assurance, however, can be given that Med-Design will be able to conclude
final negotiations on these option products. If Med-Design is unsuccessful in
negotiating future agreements, Med-Design 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.
Med-Design's capital requirements will depend on many factors, including
but not limited to, the progress of its research and development programs, the
development of regulatory submissions and approvals, pilot manufacturing
capability, and the costs associated with protecting its patents and other
proprietary rights.
There are no other material commitments at this time.
12
<PAGE>
Part II - 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
The Company held its Annual Meeting of the Stockholders (the "Meeting") on
July 30, 1999. The Company solicited proxies in connection with the Meeting. At
the record date of the Meeting (June 1, 1999), there were 7,951,570 shares of
Common Stock outstanding and entitled to voted. The following were the matters
voted upon at the Meeting.
1. Election of Directors. The following directors were elected at the
Meeting: James M. Donegan, Joseph N. Bongiovanni, John A. Botich, John
F. Kelley, Gilbert M. White, Pasquale L. Vallone, Vincent J. Papa,
William A. Jolly. The number of votes cast and withheld for each
director are as follows:
<TABLE>
<CAPTION>
Director For Withheld
--------------------- --------- --------
<S> <C> <C>
James M. Donegan 6,378,140 832,699
Joseph N. Bongiovanni 6,383,040 827,799
John A. Botich 6,399,880 810,959
John F. Kelley 6,378,140 832,699
Gilbert M. White 6,381,633 829,206
Pasquale L. Vallone 7,102,399 108,440
Vincent J. Papa 7,102,299 108,540
William A. Jolly 5,534,473 1,676,366
</TABLE>
2. Ratification of Stock Option Plan Increase. The proposal to increase
shares in the Stock Option Plan by 500,000 shares was ratified by the following
vote of Common Stock:
<TABLE>
<CAPTION>
For Against Abstain
--------- ------- -------
<S> <C> <C>
3,716,063 835,060 20,861
</TABLE>
13
<PAGE>
3. Ratification of Warrant Issue. The proposal to issue warrants to
certain officers and directors of the Company for compensation and service
rendered was ratified by the following vote of Common Stock:
<TABLE>
<CAPTION>
For Against Abstain
--------- ------- -------
<S> <C> <C>
2,705,474 1,939,309 21,946
</TABLE>
4. Ratification of Auditors. The appointment of PricewaterhouseCoopers
LLP as the Company's independent auditors for the year ending December 31, 1999
was ratified by the following vote of Common Stock:
<TABLE>
<CAPTION>
For Against Abstain
--------- ------- -------
<S> <C> <C>
7,151,457 34,813 24,569
</TABLE>
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 September
30, 1999.
* Electronic filing only.
14
<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: November 12, 1999
/s/ James M. Donegan
--------------------
James M. Donegan
Chief Executive Officer
/s/ Lawrence D. Ellis
---------------------
Lawrence D. Ellis
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 784,571
<SECURITIES> 2,638,714
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,671,334
<PP&E> 1,518,690
<DEPRECIATION> 787,961
<TOTAL-ASSETS> 5,745,114
<CURRENT-LIABILITIES> 607,732
<BONDS> 0
0
3,000
<COMMON> 79,518
<OTHER-SE> 3,558,826
<TOTAL-LIABILITY-AND-EQUITY> 5,745,114
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,707,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,071
<INCOME-PRETAX> 2,764,248
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,764,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,764,248
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
